In this roundtable discussion, we take a question from IndexGain member Craig Wood who asked:
What is better, focusing on PB and MB or buy players cheap and hope they rise again? I have low budget still in my first week and looking for advice. Due to the low budget (£75) I think it would be easier to focus on one market. I like PB but I always like to use the Del Boy in me and buy cheap to sell high but not really sure if it's a reliable model.
Nick S
Welcome first of all Craig, and I think we probably all started with a relatively small percentage of our portfolios as a 'tester' before putting any more money in, so we've all been through the same experience.
DanJ
The problem with focusing on one section when you have a small budget is that when that section inevitably falls quiet then you can get bored very quickly. Takes a lot of patience and belief in your viewpoint - and the product.
If you’re looking for your portfolio to grow I would aim for MB over summer - and reinvest the dividends in cheap potential capital appreciation (CA) holds.
SamF
With a small budget I think you need to look to flip to make any kind of quick progress. Buy transfet rumours quickly and then sell on the rise. Then repeat.
Tetleys
If we were during the season I'd be playing the IPD market I think, it's not possible because of the summer, but it's something to bear in mind for the future.
SamF
Alternatively you can trade normally and get a feel for it before investing a bit more. Yeah, IPD during the season would work too.
Nick S
When I first started out, I was playing with about £100. My intention with the £100 was to 'test the water' and see what could be done with a little bit more cash.
For that reason I was looking at everything in percentage terms, rather than pounds and pence.
SamF
I'd started with £100 but moved to £1k pretty quickly. Then waited a while until I understood things before going bigger. It was all about understanding the market for me rather than a limited budget per se.
Tetleys
Identifying swing trades is also profitable. Take a look at Jamie Vardy's 1 month price graph for classic swing trade action. He goes 40p -> 30p -> 40p etc.
I think the tactic as the portfolio grows, to hold a percentage as dividend earners and use the dividends to buy lower in the market is my current favourite.
I spend a lot of my cash on the steady earners and just leave them to do their thing.
It's a cliche, but a cliche for a reason; a diverse portfolio is essential. Identifying and getting on a trade early is the key to it all though, regardless of portfolio size.
The other part is not being greedy. I had a strict rule of 15% growth and sell, keep reinvesting the profits and they quickly compound. Also important to have a stop-loss mindset as well. I'd always sell anyone I wasnt sure of at 5-7%, take the hit and move on.
Nick S
On the point of "hope they rise again", I think it's always worth researching why a player has dipped. Has something happened to make him less valuable meaning he is unlikely to go back up to the price he was before? Or are there still good underlying reasons as to why they might rise again.
A change of system, change of manager, completed transfer or contract extension might see a player drop and not return to the levels they were at before (see Higuain).
Whereas someone who drops due to a short term injury (for example) may return to their previous price either in the lead up to their return (or before).
Frosties
I would invest in players that are proven dividends returners (MB for now) until you understand how the market works. Compound those dividends by topping up on your current holds. It took me a good 3-6 months to understand the market.
DesiBallers
The one thing that took me time to get grips with is "valuing in percentages" and how much dividends matter when your thinking on a mid-long term. My suggestion would be to decide on a good tried and tested strategy, whatever it might be, as suggested by these guys and stick with it. This is the perfect time to make mistakes which won't matter.
And also a good point to know is not to get fazed when you see just a 6% increase (personal experience) in your portfolio even after a month, but see so many other ports with huge return on investment, the market has matured a lot since the past year but still lots of room to grow!
Chris
Hard to remember that first week on the Index! But if I can recall I found myself focusing on PB at the time as I’m well into my stats.
So once I had researched the PB matrix and assessed current returns using a data provider (I used IndexGain) I made some buys.
However what followed was a complete lack of patience, I wasn’t seeing growth fast enough and ended up selling lots of these potential PB winners, probably as my portfolio was £500 at the time.
Tetleys
Anyone that can grab semi-regular goals with a decent baseline and your going to get CA and price spikes. They are the ones to target if your going for CA / PB. Patience is key with any trade though.
Why did I buy? Has anything changed? If not, carry on.
One of my slow burner trades is finally moving after months of being static and not far off the mystical 100% on him, it was always going to happen, the market just needed time to catch up - thats where the best trades can come from.
SamF
Yes patience is key. If the reasons you bought still hold then it usually makes sense to hold. On the other hand I've made the mistake of holding on to bad trades for too long in the hope that something will happen. If you're initial logic has been proven wrong you need to get rid.
FI Mane For Nothin'
I think if a PB hold hits a few bad scores that's where you need to do some further analysis.
Assess if circumstances have changed e.g. playing position or set pieces and trade accordingly. If the underlying stats are still strong but scores are weak it's a great opportunity to top up knowing a big score is just around the corner.
That's why I like PB trading. You can beat the market based on making more effort and applying logic.
Chris
Patience is hard when it’s your first week though, it still is! But yes, I think you need to decide what type of trade you’re going to make and to where possible stick to that reasoning unless a variable changes.
But when you’ve got a smaller portfolio, it’s hard not to find someone better and move on. Not always a bad thing if you end up earning better percentage returns. But it took me at least three months before I understood market enough to do this on a consistent basis.
FI Mane For Nothin'
It's always hard to cope with psychology of others winning on PB too. Highlights bias can make it feel like everyone is on the PB winner of the day apart from you and you can easily question yourself and over trade to cut losses and chase rises.
Chris
It’s one thing saying, do short term flips to increase percentage return, but if you’re making the wrong flips consistently because you’re not aware of how market works then you won’t get far.
Nick S
Transfer season is the most volatile time to get in to the market too, it's when I joined and made loads of bad trades because I didn't understand the market. If I was starting out now, I'd be trying to have a complete mixture of players and seeing who moves and why. Gather as much information as you can about the different 'types' of players and go from there.
FI Mane For Nothin'
I was definitely guilty of that in early days. It's why you will see loads of PB FOMO in August and September I suspect. The community will over-react to big scores. New users will think that's where their money has to go.
Tetleys
Even though I preach it, we all know how impatient I can be, it's natural to move players on when you see better opportunities (or what you perceive are better opportunities).
Having someone in the sell queue at all times is a biggy though, helps you continually assess your portfolio, keep a balance and allow the slow burners to breathe. They are usually the ones you ditch first when you need cash.
FI Mane For Nothin'
Agree Tetleys. Cash balance in August and September could be crucial. You want to have the freedom to back some other horses without having to sacrifice one of your well researched trades you've built a position in.
MDJ
Interesting question for the roundtable.
With a small budget, the big MB players will be out of reach but I think you want at least one in the port so you get the feeling of regular dividends rolling in - because that helps with the boredom and FOMO, which could otherwise impact your trading.
FI Mane For Nothin'
The opening up of top 200 should help smaller portfolio traders on MB. Whilst only 7% of winners will come from outside the Top 200 the CA opportunity when it does happen will be quite big.
MDJ
Beyond my point above, I think it’s research hidden gems in the sub £1 market and looking to flip once they reach a certain level of growth. As others have said, avoiding those with only transfer spec - they need something else underpinning their value too.
Yes FI Mane For Nothin' - and I still think there will be some unexpected MB winners this summer. So keeping a cash balance will be key if you want to jump on them when they emerge.
FI Mane For Nothin'
Think rapid growth in recent weeks of likes of Maguir, Ronnie and Zaha shows that traders are trying to find cheaper MB picks for the summer. The big guns haven't moved an inch.
MDJ
As someone said the other day, young defenders would be a good shout at the moment, looking at market cycles and also given that every big club is in the market for reinforcements at the back this year.
Nick S
If you're going down that route (young defenders) I think you've got to be looking outside of the current big names - de Ligt, Maguire etc because they've already got the transfer priced in and would almost certainly drop if they start the season at their current clubs.
MDJ
Absolutely. If I had a budget of £75 I wouldn’t be touching anyone over about 60p to be honest. Although it’s sometimes hard to see, I do think there is plenty of value around that mark and below, it just takes a bit more digging.
Saliba was a good example of this, of course
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So we'll end with a few recommendations for players under 60p that might suit a £75 portfolio:
SamF: Gbamin; Mukiele, Anton, Locatelli, Martin, Richter, Amiri, Oscar Rodriguez
MDJ: Oudin, Raman, En-Nesyri, Diawara, Cafaro. I’d also consider Todibo, Jordan, Aina. And Weghorst and Khazri when IPDs are on offer.
Tetleys: Jordan, Sow
Frosties: En-Nesryi, Weghirst, Fullkrug, Diallo, Cordoba, Gbamin, Remeirso
Nick S: very short term opportunities but; Henderson, Trippier, Pedro, Xhaka (touch over 60p)
FI Mane for Nothin': Not quite under 60p but Yussef Poulsen also a bargain. Call me crazy but Kyle Walker and Marcos Alonso too.
IW: Nahitian Nandez, Nikola Vlasic, Said Benrahma, Rade Krunic, Hateboer, Theo Hernandez, Alfred Duncan - Don't hold any but some other names to consider
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What would you do if you were just starting out now? Any players you'd particularly be looking for? Would you be going for a mix? Or targeting a certain area of the market?
Let us know @_FIBT on Twitter.