‘I don’t want to buy because it’s gone up in price’.
‘I’ve already missed the best returns’.
‘Performance is languishing but it will turn around, I just need to be patient’.
These are all things I have told myself in the first seven weeks of the new fantasy football season but could equally apply to investing.
For those unaware, the Premier League has a fantasy football app, where ‘managers’ are given a budget of £100m to pick a squad of 15 players ranging in price from less than £4m to more than £14m. As the season goes on, players performing well rise in price, while those failing to get many points become cheaper.
As ‘managers’, we have one transfer per week to make changes, as well as some options to revamp the entire squad twice a year.
It is the first time since I left school that I have played the game (I am currently about mid-table), but what struck me is how similar it is to knowing which stocks to buy.
Players such as Antoine Semenyo of Bournemouth have scored bucketloads of points. For players (like myself) who do not own him, this has meant losing out relative to other players.
As the weeks have gone on, his price has risen from £7.5m to £8m. While this may not sound like a lot, when trying to balance 15 picks with £100m, every half a million counts.
He is the equivalent of a tech stock. He is expensive, but has proven so far to be worth the cost. Meanwhile, those who have not owned him have been left behind.
Then there is Erling Haaland, the striker for Manchester City and the second-most expensive player in the game. He has been vital; very much the Nvidia of the game so far this season.
It has been borderline essential to own him (I did not for the first few weeks but have since added him at the expense of other pricy stars that have underperformed).
This thought process has made me realise just how difficult it must be for a manager to run an active fund. The idea in the game is to score the most amount of points possible each week. The same can be said for fund managers, whose main goal is to make the most money possible for their investors.
One technique used by some of the most successful fantasy players is to start with a squad that includes the most popular players in the game. This ensures that they will not lose out too much early on if players do well or poorly (relative to other players), but it also means that they will not shoot the lights out either – the passive approach.
As the weeks go by they add what are known as ‘differentials’. These are players with lower ownership who are worth taking a punt on. In the investment world, this is known as smart-beta (tracking an index but making small calculated risks to attempt to outperform).
Of course, the best players have invariably been those who no one chose at the start of the season. It meant that people who ignored the herd and constructed their team away from the noise could be sitting at the top of the pile. They could equally, however, be sat at the very end of the leaderboard.
As these formerly unheralded players have done well, they have been bought heavily, pushing their prices higher. Their owners may now be looking to recycle this cash into new players that have yet to score big points, but could do well in the coming weeks.
If doing this, it would be akin to a value manager, who buys these players cheaply and sells when they become expensive to buy good assets that are underperforming.
Those buying the players on the way up, meanwhile, are your momentum investors – wanting to get a piece of the pie before the form slumps, points drop off and prices fall.
I have always thought of myself as a value investor at heart. To start the year I picked my own team (with some popular picks and some out-there selections). My performance was dreadful, so as the weeks have gone by I have trended towards the index, picking popular players.
Cowardly? Definitely. But I have made up millions of places in the process.
So what’s the takeaway?
As someone who knew nothing about fantasy football, I should have been a passive investor early on, picking the same players as others. That way I wouldn’t have had such a disastrous start.
The same is true for investing, which is why so many experts suggest buying tracker funds first.
Now I am learning more, I may feel comfortable taking on some ‘differentials’, which would be akin to adding an active fund or particular stock that I like.
I certainly won’t be taking the ‘fully active’ approach to my fantasy football team, though. I have learned my lesson. The problem isn’t the players… it’s the manager.