Should I Re-invest my Dividends
on Football Index?
Table of Contents
Should I Re-invest my Dividends on Football Index?
I was inspired by this post today after seeing @FIStoxxy post his Case Study on Twitter. He’s a new account, but what great insights.
We are going to look into the feasbility of reinvesting dividends that are earnt on Football Index, looking at the reasons you may want to, in addition to checking if there’s anything that should hold you back from doing so.
So let’s strip this right back and go from the start. When a player that you hold in your portfolio wins the daily dividend payout, you will receive a payout into your Football Index balance. (See Match Day or Media Day to find out what either dividend payout is).
The day after your player has won dividends, you’ll see that your balance will now contain a little bit more than the previous. So, would it be best suited to withdraw this money into your Bank Account? or should you buy more shares with the ‘free’ money?
If you choose to reinvest dividends, you will be buying extra shares using the money that Football Index have given you, instead of using your own cash.
When implemented, it can be a fantastic strategy because:
- You can increase your holding in specific positions
- You aren’t using any more of your personal money
- You can choose to use the dividends to pursue an alternate strategy, without affecting your portfolio
I highly recommend that all traders reinvest their dividends. Obviously, if you’re planning to leave Football Index then there’s no need to reinvest, but for those building a solid foundation, this is a must.
What I’m discussing here is compounding, where your earnt dividends will enable you to purchase more shares… which then brings you a larger dividend return next time, which then can be re-invested.
It’s a revolving door, a financially rewarding one.
There’s other things you can do with your dividends though, such as adapt a different strategy that you use in your main portfolio.
For example, if you have always fancied the idea of buying Youth Players, but didn’t want to risk your own cash on this strategy, you could utilise the dividends on the Youth Players and that’s a way for you to buy players you wouldn’t normally.
However, I don’t advise that you do this for two reasons. It’s important to get in the philosophy that the Dividends earnt are yours. Afterall, if the money is sitting in your cash balance, it’s withdrawable to your bank account. Thus, it’s yours.
Secondly, but equally as important, why would you waste money on players that you wouldn’t typically buy? Trust your strategy, afterall if it’s paying dividends, it’s winning. (No Pun Intended).
Let’s run an example. Using the fantastic Jadon Sancho, who’s captivated Football Index recently.
If you invest £200 when the Share Price is £10, you will begin with 20 Shares.
Let’s just say that he will earn £1 in dividends over the course of a year, which is reasonally acceptable giving that he should be the Transfer Story of 2020.
With these dividends, you will have £20 earnt from Sancho alone, allowing you to re-invest in him.
This means that your 20 shares in Jadon Sancho then increase to 22 shares, which is a modest 10% increase.
You now have 22 shares which earn £1, which can then purchase another 2 shares. This is the revolving door that I mentioned, but the above example doesn’t even include the fact that the Shares in Jadon Sancho could increase, giving Trading Profit in addition to dividends.
Reasons Not to Reinvest
The greatest thing about compounding dividends is that it gives you the ability to grow your wealth. It’s a powerful strategy, but there could be some reasons why you would choose not to utilise this straegy.
For example, if you simply need the money. There’s no point in re-investing dividends if you would benefit from the financial security of extra money in the bank, it’s best to live comfortably!
You also need to pick your dividend winners selectly, Football Index is full of players but 95% of these aren’t earning any dividends.
If you continue to reinvest dividends in the same player, you could be leaving yourself slightly open on the position, instead of being diversified. With that being said, you can compound the dividends over a wealth of players, which also regularly earn dividends.
Below is the image that I mentioned at the start of the article, the Paul Pogba case study. Over 12 months, you would have compounded over 400 shares in Paul Pogba.