With the start of the football season just a matter of weeks away now, the anticipation is really starting to build on the Football Index and if you haven’t got involved in it yet, now’s the time.
My fellow columnist Christopher Walsh has written some informative articles about the proposed performance buzz dividend which the Football Index is planning to bring in for the start of the new season and how potential profits can be made, but the focus of this article is to try and answer a burning question for most traders, when is the best time to buy and sell your shares?
The answer to this question will be slightly different depending on the strategy you want to employ, i.e short or long, and the amount of money you have at your disposal.
For traders looking to make short term profits then transfer rumours are a great way to make a quick buck. Any player on the Index currently linked with a move the Premier League is likely to attract media buzz points which may then lead to a media buzz payout for any shares held in that player. If you are able to react to a breaking transfer news story quickly you can purchase shares early doors before other traders have a chance to react. Depending on the player involved and the source of the rumour a share price can rise rapidly in just a matter of seconds and if you time it right then potentially hefty returns can be made. Once the share price has risen enough where you can make a profit you can either sell the shares instantly or you if you think the transfer rumour will last a few days or weeks you can hold on to the shares to see if they attract any media buzz dividends.
The potential gains can be illustrated looking at Morata’s price graph below. When Morata was first linked to a move to Man United his price rocketed way past the £5 mark. Then when United announced the signing of Lukaku his share price rapidly plummeted. However, when the Chelsea rumours surfaced his share price shot up again to around £4 where he currently sits.
Given the amount of transfer rumours flying round this is a very easy way of making money but be warned, if a proposed transfer move breaks down or the rumoured interest in a player ceases then the share price can fall just as quickly! If you are unable to monitor the football news/Index on a regular basis or a more risk averse then perhaps a longer-term strategy would be better for you.
A medium or longer term strategy mainly involves identifying players that you believe have the potential to increase in share price for whatever reason, perhaps a young player who is yet to fully establish themselves at a big club or a player outside the Premier League which you feel is underrated. Currently there are a whole host of promising young players on the Index available to buy for less than £1 a share (Embolo 66p, Werner 84p, Pulisic 85p, Davies 79p).
Although these players are perhaps not as good as Messi and Ronaldo, if they play regular minutes for their club side then as long as they play in one of the 5 major European leagues they will be in with a shout of winning performance dividends. Even one performance dividend win could give you as much as 10% ROI so there is plenty of value to be had.
Day to day you may not see much movement in your portfolio as a player’s development takes time but if you invest in a player that eventually makes a name for themselves on the big stage then you may just make a very tidy profit.
Romelu Lukaku’s price graph is a great example of the financial rewards that can be made if you are patient. At the turn of the year he was trading close to £1. For those traders who got in early and held on to Lukaku they should now be looking at huge profit to show for their patience.
Once you in a position where you have a significant profit on the share price for a player you can then either cash in your profits and move on to another player or keep some or all the shares you have as they can still attract more media and performance dividends which can potentially mean even more profit!
Ultimately though the best advice is whatever your strategy – buy low and sell high!