The Risks of Buying Young Players
Updated: Jul 1, 2020
When deciding who to add to your portfolio on Football Index, young players will always be part of the consideration, but what are the advantages and disadvantages? Why are they so expensive? and most importantly, are there risks associated with buying this area of the market, and if so, what are they? In this article, I am going to look a little closer into young players, identify some of the risks associated with buying and offer some thoughts on the future of the market and how it could affect these players.
Young players are amongst the most popular on Football Index, and therefore highest priced, and it's clear that there are few strategies more personally rewarding than identifying and buying a young player, and then tracking him throughout his career all the way to the top of the game. Not only is this financial rewarding, but on a personal level, knowing you have made prudent long term decision, and can now reap the rewards. The theory is simple, but what are the potential pitfalls, roadblocks and risks associated with this strategy?
To begin with, we should be clear on what we mean by 'young'. For the purpose of this article, we can broadly define young as those under 21 (or involved in U21 setups) as these are the players most likely to be breaking through and finding their feet in the game, and even making waves on the international scene in some cases. Having said that, this article will also likely apply to players in the 21 - 24 years old category as well.
Of the current top 10 players on Football Index, 5 out of 10 of these are 21 or under (Jadon Sancho, Kylian Mbappe, Trent Alexander-Arnold, Erling Braut Haaland and Kai Havertz). Just outside the top 10, in 11th & 12th are Mason Greenwood and Phil Foden. From the above list, Jadon Sancho is currently the king of the index and has been for some months now.
This focus on young players in the trader community is likely driven by a number of factors including
Potential for career dividends
Potential for big transfer(s)
In the case of Jadon Sancho, this is especially evident, having been linked with Manchester United and a move to the Premier League for some time now. Combing this with his current position in the Borussia Dortmund team and England international setup, it's easy to see why he is such a valuable hold. Over the past few months, regular Media Dividends have already started to steadily roll in for those holding.
Whilst it's clear that young players and exceptional talents are highly valued on Football Index, this article aims to identify some of the risks associated with this approach. By no means, am I trying to say young players are overpriced, or traders should not buy, but instead, trying to be objective and weigh up the argument for or against.
First, lets look at young players in general and their involvement in matches
Young Players - Breaking Through & First team Football
At the top of every young players development plan is the need for first team football experience at the highest level. Unfortunately, few young players will experience this and of those that do, even fewer progress to become first team regulars. It's a sad state in football, that for every young player who progresses into the first team, there are many which don't. even those who do progress beyond the academy and into the first team, struggle at some point and need extensive experience before they can be considered ready for regular first team football.
Whilst many of the top young players on Football Index have progressed beyond this stage and have established themselves in the first team, this is not by any means proof that the player will remain there, or that their future is any more secure. It's very common for players to be introduced to the first team, tested and then to go quiet for a few months, either due to being out of favour, injuries or just circumstances do not work in their favour.
So let's look more closely at what exactly the risks are with young players.
Prices are nearly always based on hype or expectations and not the 'Here & now' (with a few exceptions)
Young players are generally less consistent and play a less prominent role in the team
Inconsistency in young players and price volatility
Prices are arguably inflated by the current Media Day Dividends system and any future changes could have a significant impact on prices
Physical development of a player can determine when he peaks and this can vary greatly
To break down the above, let's begin by saying that young players on Football Index have always been valued highly, and this is unlikely to change. Over the long term, young players who remain on course with their development and maintain, or improve their current profile to a high level will rise with the market. In that sense, there is a valid argument for saying young players are safe holds. However, this article seeks to address this assumption and identify the risks involved to suggest that this will not be the case for the majority of young players currently in the market.
The 'Here & Now'. Prices & Expectations
My previous posts on Building a Portfolio and Identifying Players to Buy, delves deeper into what factors I use when researching and buying players, but one of these decisions, is always whether I am focused on the 'here & now', or the future. Of course, each portfolio, should have a range of players covering each player profile, but it's important to be aware of short term expectations, especially with young players who often have high price points.
As most traders will know, the majority of Match Day Dividends are won by experienced senior players playing the full 90 minutes at their peak and for top clubs. More on Media Dividends below in point 6, but the main point here is that young players should very rarely be bought for the purpose of short term dividend returns. There are, of course, as with everything, a very few exceptions here, with one current exception being the Bayer Leverkusen midfielder, Kai Havertz who regularly scores highly on the performance matrix with impressive statistics and a few recent wins.
In light of this, the question when purchasing young players are over your expectations, and how patient you are likely to be in the short and longer term. In effect, and in the majority of cases, you are foregoing a season or two (or more) of Match Day Dividends to allow time for the player to develop, and the question needs to be asked as to whether this is something you are happy with, and have you balanced this elsewhere in your portfolio with proven dividend winners?
Of course, another element to this, is that there is a possibility the player may not develop as expected. This is primarily the reason for reducing the risk in your portfolio and in the case of young players, diversity to cover more than eventuality.
It should also be mentioned here that prices for the top young players far outweigh some of the regular Match Day Dividends winners. When weighing up the benefits of both, it should be asked if the potential for future dividends outweighs the likelihood of receiving short term dividends, remembering also to factor in how any dividends which are won in the short term are spent. Further to this, there was previously a commitment from Football Index to 'review' the dividend structure prior to each season. Whilst there is no guarantee, many traders in the community, interpret this to mean an increase of some form, which also needs to be factored in to the decisions regarding buying players for the future or the 'here & now'.
2. Role in the Team
Alongside the immediate dividends factor, the role of a young player in the team should also be part of your research. This is not simply a case of how many games, but their overall role in the style of play, statistics and character in the dressing room.
A couple of questions which I like to ask when identifying young players to buy.
Are they likely to be restricted with first team opportunities? Who are they competing with in the same position?
Are they playing at a high level - ie European competition, international?
Is there a clear path to progression? Long term, will they replace an ageing player?
Is the team focus towards possession, or counter attack?
Do they have a central or key role in the formation/ tactics which would be favourable to the performance matrix? See my post on Identifying Players to Buy
How likely are they to regularly play 90 minutes?
What is their character and personality off the pitch? Are they likely to clash with a manager?
The above questions can be interpreted depending on the individual trader, but the crux of the matter is judging how likely a player is to play regularly, perform well, develop consistently and generally be happy at their club. These are all crucial requirements for the success of any young player.
Tip: Judging young players potential at the club they are playing for can be challenging. Whilst the top clubs will in general have better academy, facilities and a large talent pool, on the flip side, first team opportunities can be easier to come by in smaller clubs, where the immediate pressure to succeed is not so great. It's therefore worth considering young players who play regularly at smaller clubs in eligible leagues as they can develop quicker with the more first team football they have, and transfer to a bigger club once they are established.
3. Inconsistency in young players and price volatility
As with the previous factors when considering buying young players, price volatility and inconsistency should be part of the decision making. At various points in the season, young players will experience price spikes and dips for a number of reasons. For example, pre-season can bring new hope and opportunities for young players to shine. Especially after a summer of international tournaments where senior players return to training later, or even when managers want to see what they are capable of. The same with early on in the season and the domestic cup games where youngsters are often given chances against lower league teams. However, on the flip side, this can mean a dip in price for other times including dividend increases or promotions, where money will be directed into the more senior dividend earning players, as well as the end of season if a transfer is unlikely for the young player.
Riding these dips out over time and holding strong will most likely pay off in the long run, but the relatively high price point of most young players makes trading in and out of these quite difficult and timing is vital.
Alongside this, it is very common to experience a great deal of inconsistency in the performance of young players. This can be especially frustrating, with a player having a poor game one week, followed by a sell off, only to excel in the next match. This can be further exaggerated by overreactions within the trader community, where a player is labelled 'not suited to the matrix' after a few games where he has scored poorly. The rule, as with any hold on Football Index is to remain patient, and believe in your choices. This will in most cases pay off over time and patience is required, likely more so with young players, than the more senior players.
4. Current Media Day Dividends System and future Changes
As discussed, young players are rarely bought for short term Match Day Dividends, with future potential and Media Day Dividends having the biggest influence on those deciding to buy. Whilst career development and future dividends are very difficult to predict (who knows how the dividend structure will look in 5 years time!), we can reasonably assume that the majority of the top young players will still be playing at a high level in 5 years time. This would, in all likelihood, mean they are positioned to challenge for Match Day Dividends which will always aim to reward good performances.
What becomes less certain, and for myself, is an area with a lot of uncertainty is the Media Day Dividends and how these will change or adapt over time.
At the time of writing, Football Index have carried out 2 surveys recently on what traders think of the current Media Day Dividends system and how it could be improved. We are currently awaiting the results of this, but there is a general consensus within the trader community that a Media Review (and changes) and to be implemented, and to many, long overdue!
In light of this, should the Media Day Dividends system be reviewed and changed this year, there is also a likelihood that it will be reviewed again in the near or distant future. News outlets are constantly evolving, and the below could impact the development of the Media system and subsequently imapct the value of players.
How news is communicated
The sources themselves
Points scoring system
For these reasons, it should be noted that there is a significant risk involved in buying any players based on the expectation that they will receive favourable score on the Media chart and therefore win dividends. A change to one of the above could easily have an impact on the value of players. The expectation would be that any impact would be minimised and of course, this applies to any player in the market, but there are significant reasons that this could impact young players more than others.
Below are a few possible changes to the Media Day Dividends system which have been discussed by Football Index themselves and within the trader community.
For a while now, Football Index have floated the idea of introducing foreign media outlets to the qualifying news outlets. You can read more about this in my post on Media Day Dividends, but for the purpose this article, we will look at why and how this will impact young players.
As it stands at the time of writing, the current list of qualifying articles, has a heavy UK bias and this inevitably means there is a weighting towards English players, and in particular young English players, being reported on and therefore challenging for Media Day Dividends. Leveling the field to include equal amounts of sources from each country would inevitably reduce this media attention.
Should this change, then depending on the sources, their focus and style of writing this could also impact young players across the board. If, for example the news outlets were broadsheets, or outlets with a more serious focus towards on the pitch performance, as opposed to personal lives, then we could see less attention for young players and more on those who perform well on a given day or week.
Positive/ Negative Point Scoring
Alongside changes to the qualifying outlets, another change regularly floated around the source of some frustration in the trader community, is the allocation of points scoring and how this can lead to some obscure articles being rewarded more highly than others. One of the questions surrounding this is whether or not on the pitch performances should be reflected more highly in the media, for example with increases points allocation for performance related words such as goal, Hat-trick, Winner, Victory, Champions, Title. whilst there is a logic to this, it would inevitably mean that the articles currently scoring highly would be reduced. It's difficult to predict exactly how this would impact young players overall, as these would still likely be a key focus for sports journalists.
5. Physical Development of Young Players
A subjective one, but the physical development of a player can sometimes be worth bearing in mind for your long term strategy. Whilst it may sound strange, there is some basis for this, with the reality that some players will develop physically quicker than others, and therefore be more ready for regular first team football. Whilst this should not be the determining factor, and in all likelihood isn't something most traders consider it is worth noting when deciding whether to buy or hold players for the long term. There could also be an argument for players who develop later, also peaking later and having longer careers, but again, this is very subjective and a separate debate in an of itself. It's inclusion here is merely for the purpose of those planning with career dividends in mind.
To briefly summarise, buying young players is potentially a very rewarding strategy on Football Index, and should those players return consistent Dividends throughout their career, buying early can really pay off. If, as expected, Football Index continues to grow at it's current rate, then today's prices will look miniscule in the future, as is the case with some traders who purchased shares 3 or 4 years ago. Having said that, the above outlines some of the potential pitfalls and risks associated with buying young players, and hopefully will be beneficial in deciding if this is strategy you will look to adopt, and if so, to what extent.
As with all strategies on Football Index, there is no right or wrong way, and the beauty of the platform is for every trader to have their own strategy and back their choices. The majority of the time, with the right balance of patience and sound decision making, it will pay off.
Thoughts, comments and suggestions below please.