The Wonderkid Bias

Updated: Jun 26, 2020

To a new trader, The Football Index Top 200 is an absolutely mind-boggling rank of Footballers' Share Values - aka Future Values. World-dominating GOAT nominees, Ronaldo and Messi, currently sit ranked 42nd and 16th respectively. Whilst easily-applicable logic explain why young stars like Rashford, Sancho, Mbappé and Håland (Haaland if you will) are highly popular on the index, the Top 200 is littered with wonderkids that raise the eyebrows of new and experienced traders alike. What is it about these players that is so attractive? Why are they worthy of prices exceeding that of world-renowned superstars?

In simple terms, the core reason is that one day, one of these 'wonderkids' will be passed the baton. Older players, like Ronaldo and Messi, are getting older and have limited years left - despite still posting unbelievable numbers in the European elite. Simply put, investing in an old dog that won't necessarily get better, but will get worse, puts traders off. Instead, they go to the opposite end of the scale. Who will improve drastically to become one of the next big things? Wonderkids. Alas, many traders invest in wonderkids, driving their value up. One important note - your investment is for the next three years. So, traders invest in young players that in three years time will be more valuable on the index.

That's the short story.

To clarify, the likes of Trent Alexander-Arnold, Kylian Mbappé etc are not in this category of wonderkids. Yes, they are young. However, they're proven world-class talents who've dominated Champions League/Premier League/International Football for at least one season. They win dividends on the index now, and will likely win dividends in the coming years. They can barely climb any higher in their careers, only perform the way they have done consistently for the next 10 years to win more trophies with their respective clubs. They are easy to interpret as expensive superstars on the index. I'm talking about the wonderkids that have reached scarily expensive heights in the Top 200 for teenagers with little elite football under their belts.

Jude Bellingham, 16 years old, playing in the centre of the park for Birmingham City, has reached £4.62 per share. 19th most expensive player on the index with a total of 32 senior appearances to his name in the second tier of English Football.

Rayan Cherki, Lyon's 16 year old first-teamer, has played 6 games this season as an attacking midfielder or winger in Ligue 1. His price is 25th highest at £3.91, directly above Leroy Sane and Eden Hazard, both established global superstars.

Ansu Fati does have a unique award to his name, as the Youngest Ever UEFA Champions League Scorer, but one goal alone can't be the sole reason to justify the 17 year old's price of £4.18 - and his remaining 4 goals in La Liga aren't statistically admirable over 16 appearances. Then you add to the equation how many times Barca have turned to their youth over the last few seasons, you observe countless young players on loan or the bench looking to get out of the Catalan setup in pursuit of first-team football. It's hard to guarantee Fati will play regular first-team football at Barca no matter how good he looks right now. Barca have been prone to over-sign and neglect academy talents. That said Fati, unlike most of the wonderkids, has actually won dividends this season.. Perhaps this is a better indication of a 'safer wonderkid'. But still an incredibly expensive investment with such little evidence to go on.

The list of wonderkids that haven't had one consistent full season of elite football, yet find themselves in the Top 200 on the index is astounding. James, Martinelli, Camavinga, Saka, Gilmour, Ihattaren, Elliott. That's 10 names in the Top 50. 1 in 5 Top 50 players on the index have barely played a season of senior, top-tier European football.

Of course, one obvious reason for their price is the POTENTIAL. This word is thrown around index traders regularly. 16 year olds scoring against the best defences in European Football are a sure indication that they have talent. Rumours of transfers to European giants suggest professional scouts validate this 'potential'. For some players, the potential media hype serves a valid reason to invest. Bellingham to United has been scattered in the media for a few months. Cherki's coaches claiming he's better than Mbappé at his age - rumoured to Real Madrid and Man United. But neither of these wonderkids have won substantial media dividends yet. In fact, they've won 1p between them.

Thinking back to wonderkids in the previous few years; Bakkali, Pjaca, Iheanacho, Mayoral, Schrijvers, Dahoud, Periera. Plenty of these lads are not where we all thought they'd be. Plenty are on the index today. Dahoud runs at 0.61, Andreas Pereira at 0.67, Pjaca 0.44, Iheanacho 0.88. Not exactly big numbers for players that had been considered a superstar-in-the-making within the last 5 years. Even Che Adams, last season's 21 year old Championship sensation, made a move to the premier league and has posted just 3 goals in 22 appearances for Southampton. Playing consistently at the very top is not easy, especially for a youngster.

Let's say your wonderkid lands a transfer. Then what? When the hype of their transfer dies, what happens? If they transfer and don't hit the ground running, what next?

Talking to regular wonderkid traders, they all seem to have adopted the same strategy. Sell him the moment the transfer materialises, if not 'just before'.

This indication suggests their price will crash at the time their media attention is highest - so there's a solid chance they'll struggle to win media dividends in the time that they're held. Upon further analysis, you'll notice slightly older 'young' stars at European Giants seem to have significantly lower prices due to lack of media and playing time. Tahith Chong seems to have been on the brink of a breakout season for years at United. Now 20 years old, he's £1.26 on the index and still waiting for regular football. If the index was as big as it is now when he was 17, how expensive do you think he'd be?

For argument's sake, let's then propose the wonderkid establishes themselves as starters in a top European Club, what happens next? Even Federico Valverde, one of Real Madrid's CURRENT starting centre midfielders is just £1.63 at the age of 21. Well, for certain wonderkids, PB buzz could start to factor in as they'll be playing at a better club than before...presumably. Prolonged media attraction will likely boost them to the same heights as Haaland reached this season. This is a great result to those that bought a wonderkid early-days, on the basis that he will FULFIL POTENTIAL. Jackpot.

From our community, we don't hear of many traders that intend on holding on to all of their wonderkids for a full three years. Plenty don't even intend on holding beyond a transfer. And by our estimates, next to none of them will earn dividends from PB or Media Buzz before they sell. So the most common way traders are making money on wonderkids is flipping before the potential is fulfilled. Bellingham, Cherki and Camavinga have yet to earn any dividends despite their links (well... Bellingham has won 1p).

Furthermore, as History tells, only a fraction of the hyped wonderkids reach the superstar level. The majority do not go on like Trent Alexander Arnold or Mbappé have done. So if you've onboarded a wonderkid, and are one of the few who decide to hold beyond their next transfer, you're praying on him fulfilling potential. If he does, you're in the big bucks. Unfortunately, there are few times in a decade that a youngster hits form quite like Haaland did this season. If he doesn't, you missed the boat and risk selling at a loss. Potentially a big loss.

High risk, High reward.

That's the bottomline. Traders are willing to risk investing in the 'next big thing', with very little chance of dividends in the foreseeable future, on the off-chance they'll hit the jackpot. If they don't look like they're going to make it, every trader hopes to climb the ladder and sell before the hype bubble bursts. It's Football Venture Capitalism at its finest.

So why risk it? Well - you can earn huge profits in finding the next big thing. We're talking over 300% early adopter to superstar. Alexander Arnold was £2.21 this time last year, as a great young prospect. He'd played regularly for Liverpool during 17/18 and 18/19 as they rose to success. His PB kicked up to the next level as Liverpool rose to European stardom and masses added him to the portfolio. He's stable now. Established as a 21 year old star. Hugely rewarding to those that onboarded in the early days whilst even paying dividends to those that bought him at a relatively high price.

The issue is, if everybody intends on selling before the potential is fulfilled, before the player is established, then just a few traders could cause a crash. Upon a transfer, or even random value drop, if the price starts dipping then many traders could offload to salvage some profits - given so few of them genuinely intend on holding for the entire three years of their 'bet'.

The solution? Be willing to jump ship and monitor daily if you're holding a profitable wonderkid. Or be willing to swallow a very unpalatable pill if the price crashes, you decide to hold tight, and he doesn't make it at the top level.

Failing that, don't buy somebody so unproven. Plenty forget the 'high risk' part and only see 'high reward'. Best way to avoid the risk is to not invest in the first place.

De Bruyne (29p divs this season) is around the same price as Bellingham (1p divs). Hazard (10p divs this season) is cheaper than Cherki (0 divs). Salah (30p divs) is cheaper than Martinelli (1p). Kroos (31p divs this season) is cheaper than Camavinga (0 divs). These established stars play Champions League football every season and have done for years. They will do for years to come. They have all won dividends.

Less risk, still rewarding. Just not a jackpot-experience...

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Football Index Gurus | United Kingdom