Hindsight 3: Condensing my portfolio to just 5 players! by John Nellis

Updated: May 13

Our editors Westy and Vespasian have long argued over their Football Index (FI) portfolio strategies. Westy goes diverse and long term, Vespasian goes condensed and generally short term.


Our consulting editor Hasselbanker (a financial market expert outsider looking in on FI) suggests theories point to a minimum of 12 uncorrelated assets to be diversified enough. The big caveat is how you look at correlation. For example, a second tier German team footballer (Player X) doesn't have a correlation to a Premier league player (Player Z), but they are footballers. So in the context of an overall portfolio for you- as an individual has in life- I'd bunch all of this together and say it's one asset type- footballers. But within the platform itself and your FI portfolio, the different players (X and Z) are uncorrelated in my opinion. As long as your holds aren't players in the same team competing for MB or positional PB then they count as uncorrelated holds.


We all listened to John's Football Index podcast 'High Wide And Handsome' and heard him considering a gutsy strategy move to an extremely condensed portfolio. We had our interest piqued therefore, when John (@IRISHFI1) tweeted about going ahead with this plan. This sparked some debate on the Twitter timeline and even had Westy considering trimming his portfolio down!

2 months on, we were keen to catch up with John and gain some hindsight into how his new strategy has been going, and if he has any lessons learned that may be valuable to the community.


Many thanks to John for writing this article. For more information on John, check out his trading profile in our guests section.

Strategy Change – 20 players to 5


In early February, I made the decision I wanted to condense my portfolio from 20 players to around 5. This was an idea I had toyed with for a few weeks on the podcast, and I decided to take the plunge. I will talk through the reasoning behind this decision and summarise how it materialized.


Why?


When you first start trading on FI, every beginners guide clearly states how key diversification is as it protects you from your lack of knowledge and the market. It protects you from losing too much of your overall portfolio value on a single trade - safety in numbers, but how big are the rewards? My thinking was that to really elevate my portfolio from 7k-ish to amounts that I would consider life changing, I would need to adopt a slightly riskier approach. I agree diversification is key when you start trading for multiple reasons, but as you become more confident in the market and your trading ability I feel it is much less important.

The plan was simple, keep the 2k I had tied up in Sancho and Neymar where it was, and sell up the other 5k. Keep a significant cash balance and be more opportunistic as a trader. Jump in when I see players taking off, or ideally about to take off, ramping up my returns while happily incurring more risk.


How did it go?


On the first day, I listed everything which didn’t feel great. There were holds I had grown quite attached to, and many which I felt my research hadn’t yet truly came to fruition, with healthy profits down the line. The market wasn’t particularly liquid at the time, and many of my futures still hadn’t sold to market after 2-3 weeks. However, any that did sell were swiftly reinvested into a player or two I had identified and believed were massively undervalued. I managed to reduce the portfolio to 8 players after 3-4 weeks. Sancho, Neymar, 4 I couldn’t get rid of and 2 new acquisitions.

At this stage, the leagues were in full flow and champions league football was coming thick and fast, but not half as thick and fast as my boredom. 8 players, a few either injured or not playing every week left me with A LOT of match days with no players in action. To an inactive trader who checks their portfolio monthly/quarterly this wouldn’t be an issue, but to a guy who is used to checking his portfolio a few times a day and talking about FI frequently on podcasts, this was a huge issue. I was out of work, sport and some social events too due to knee surgery, so football was one of the few things I had to entertain me.



Of the plethora of advice given to me under the original post, this is something I had considered, but evidently not hard enough. I missed the thrill of match day dividends (PB and IPDs) massively, even stooping to sticking the occasional £5 first scorer bet on champions league games to fill that void. Watching Lyon vs Juventus just isn’t the same if you don’t have some skin in the game. As stubborn as I am, and as much as I wanted to try and prove some doubters under the original post wrong, I realised after about 4-5 weeks that it just wasn’t for me. I now sit at my sweet spot of 20-25 players. This number works for me because I have both variety and significant dividend wins. Holding 50 futures in 200 players just doesn’t do it for me, winning £2 on a bronze day star man wouldn’t excite me anywhere near enough.

However, I do see that larger portfolios may need to diversify and hold more players than 20, to ensure they aren’t in control of too large a percentage of a players price, and in a difficult position to sell without crashing the player.

Conclusion


I would speculate that every Football Index user is here for one or both of two things, making money and entertainment. I feel a sub 8 player portfolio only really suits a very specific demographic of FI user. A person here purely for the money, who doesn’t care much for the thrill of dividends and has a significant appetite for risk. I will be sticking to my current portfolio size for the foreseeable.

Join the debate:


  • What is your sweet spot?

  • How many players are in your portfolio?

Let us know in the comments section under this post.


Thanks for reading!