Updated: Feb 3, 2020
One point that I have not yet seen mentioned anywhere in the Football Index community is that when purchasing shares for a long term hold you should consider the dividends they will return over the next 6 years.
Now of course you will only earn dividends for the first 3 years as that is the length of time your share is valid for - according to the Football Index share period rules. However, what should be considered is the price that you sell the shares for. The demand for a player in 3 years time is more important than the demand for the player now when buying shares for a long term hold. The reason for this is because the demand in 3 years will determine the price you are able to sell the shares for.
Considering the dividend yield over a 6 year period can be very useful to make rational decisions and can help you avoid getting unknowingly sucked into ‘bubbles’. It can be very profitable to buy unproven youth players and sell them for a large profit, however, it is more risky than buying young players who have solid, improving PB scores at cheaper prices.
Due to the 6 year trade, there are two types of players I broadly avoid purchasing as part of my low risk strategy surrounding long term holds. Firstly, unproven, expensive, youth players and secondly expensive, older players.
Unproven, expensive (£1.50+) youth players can be some of the best players to make massive profits on. For example, in April 2019 when Greenwood was just £2.00 there were traders laughing about how ‘overpriced’ he was and yet now just 4 months later in August 2019, he is over £4.50. How successful, relative to their price, a 17 year old that has played less than 5 first team games will be is too hard to predict and because of this it is too much of a risk for me. If Greenwood does go on to become a regular starter for Manchester United and has a very successful 3 years then the demand for Greenwood in 3 years will be massive as he will still only be 20 and it is likely Football Index will have increased dividends and grown in size by then.
On the other hand, if he does not live up to being one of the best players on the platform for returning dividends (He is currently 9th most expensive) then he will drop massively in price. I can see arguments for why you would buy and why you wouldn’t at his current price – one thing for sure is that given what we know, so far, on a player like Greenwood, it is a risk buying at his current price.
Expensive (£1.50+) older players can be good short term holds if you are able to time them right. However, as they are almost certainly not going to have a 100% dividend yield and will most likely retire over the 6 year period leading them to be worthless – they are not always good holds and have limited potential to double or triple in price. I would advise limiting buying older players to buying for short term flips and ensuring you have an exit strategy.
This leaves us with my favourite type of player to buy for a long term hold – fairly proven, young, relatively cheap (under £1) players. I have made 100% - 200% profits on many of these players and the youth player database can be used to find such players. The reason I like to buy these players is that they are relatively low risk as they carry real dividend potential now for the next 3 years and their dividend potential is likely to increase further in 3 years when it is time to sell. This means we can earn some dividends whilst watching the player’s price gradually rise until they fall into the expensive (£1.50+) category and we can start to question whether to sell or not.
To conclude, when buying shares for a long term hold, it can often be useful to consider their value which ultimately is derived by their dividend yield over a 3 year period (Dividends). You then need to consider what the player’s potential dividend yield for the following 3 years (after the first 3 years) is as the demand for the player after the first 3 years will result in the price you are able to sell for.