Invest like a Premier League football manager – are you conservative, an explorer or a pioneer?
More than a month into the Premier League season, which began on 10 August, the beautiful game is continuing to surprise us.
Managers are feeling the pressure to prove that their investment decisions were right during the transfer window, with both big spenders and low expenditure clubs under the spotlight. And these investment decisions are rightly under scrutiny.
Premier League clubs spent 16 per cent less in the transfer window for the 2018-19 season compared to the year before, suggesting that managers are reducing their levels of risk-taking. This continues a trend that has been developing over the last decade, highlighted in Moneyfarm’s recent report on the business of football.
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The perfect strategy?
The questions that we ask of football managers’ financial behaviour are very similar to those that we ask ourselves when we’re investing.
The clubs that invest the most – in the form of transfer packets and wage expenditures – reap the biggest short-term rewards in the form of prize money and TV earnings.
However, as the investment landscape evolves, and longer-term vision becomes increasingly important for survival, football managers and investors alike need to adopt a more sustainable, strategic approach.
That’s because there’s no such thing as a perfect investor or manager, just the right strategy for a situation.
Whether the aim is to reach the final or to avoid the relegation zone, investing for retirement or to help your child onto the property ladder, it’s important to consider the investment decisions that will put you on the right path for future growth – tailored to you.
It’s those who marry their investment decisions to a longer term strategy who will minimise the chance of losing out.
Pick a management style
Conservative investors – such as Arsene Wenger during his time at the reins at Arsenal – tend to be protective over their money and have the patience to see their investments through, before making any knee-jerk reactions.
This approach is often taken by investors who want to ensure that their capital is well protected, and are happy to wait longer for returns in order to achieve this. They have clear goals, and know what is needed for success.
Investors who are motivated, diligent and determined are more likely to subscribe to an exploring approach. Exploring investors, such as Jurgen Klopp at Liverpool, want quality experience, and believe that wealth needs to be grown to achieve this. Looking for new ways to help achieve this goal is typical, with a clear back-up plan waiting in the wings.
Taking this strategy a step further, investors can take a pioneering approach, suited to those with an innovative, bold, or tenacious view of managing. For example, Manchester City’s Pep Guardiola has had the resources at his disposal to match his own pioneering approach, and while there have been costly mistakes, the sporting returns have been significant.
Guardiola dominated throughout the 2017-18 Premier League season, and secured his first English football league title with a record of 32 wins.
Similarly, the pioneering investor looks for new frontiers, and won’t let surprises deter them. They always have an eye on the future, but the primary focus is on high achievement.
Investing your eggs in multiple baskets
Whether you’re conservative, exploring, or pioneering with your investments, the rules for successful investment remain the same.
Diversification is key. Our research found similarities in the impact of diversification on the performance of Premier League players and on an individual’s personal investments. The most positive returns for each came from a fully diversified portfolio.
Clubs fighting for a European place are less likely to initiate their youngsters due to the impact on revenue. This is seen with the limited number of academy players in Premier League first-team squads, and the low numbers of caps they have.
Instead, club managers rely on a loan system that will increase the value of their players while they’re gaining more match experience at other clubs.
Conversely, data from the Football Observatory shows that the average percentage of club-trained players among Championship winning teams was 24 per cent. This is 10 per cent higher than the Premier League average, and suggests that training footballers in-house to achieve sustainable success in the long term is deemed more important to lower league clubs.
Ultimately, investing time and money in nurturing existing talent reduces risk when a club is trying to secure a sustainable future.
The lessons to be learned
The key to successful investment is taking a long-term strategy, with the winning formula being a fully diversified portfolio, a clear and attainable end-goal in mind, plus the willingness to adapt to life as it continues to evolve.
Stability and longevity should be the central pillars to every investment decision. There are also tactics that investors can adopt to minimise risk and help secure a more financially sound long-term return. Start with regular contributions, or test an approach with smaller investments.
For those starting out in personal wealth management, it is crucial to become familiar with the workings of the financial markets and get an educated grasp of financial planning to ensure decisions are up to date, well-informed, and will give a consistent return on investment.
As we have seen since the season began, a strategy driven by pressure to achieve, combined with the need for a quick return, is unlikely to be advantageous in the short or long term.
Operating with financial awareness, careful planning, considered decisions, and patience will yield greater results for scoreboard success.
Read more: Five things to look out for in the Premier League this weekend