How to start investing in football clubs

There are 10 football clubs listed on stock exchanges including Manchester United, Juventus, Lazio, Ajax and FC Porto

Old Trafford, home of Manchester United. Cristiano Ronaldo is leaving the club and its owner is keen on selling. News like this may affect the club's share price. Getty

The past two and a half years have been a struggle for football clubs.

Owing to widespread social distancing and other health and safety regulations, empty football pitches have resulted in some of the world’s top-performing clubs missing out on key sources of revenue.

Still, with a return to full-blown normality this season, shortcomings will probably be circumvented owing to the Fifa World Cup currently being held in Qatar.

With the football season now in full swing, big news is hitting the scene.

Watch: Manchester City fans in Abu Dhabi interact with their favourite stars

Portugal’s Cristiano Ronaldo is leaving Manchester United and its club owner is keen on selling, while Juventus has seen its entire board resign.

News such as this may affect the share prices of these clubs, so make sure to do your research and formulate a well thought out strategy before buying or selling shares of your favourite team.

Remember, being a fan of a club does not mean you should automatically invest in their shares.

As with any investment, make sure you are acquainted with the do's and don’ts of trading.

Beyond matchday sales and stadium leasing fees, football clubs generate their revenue in a diversified way. This includes sponsorship deals, merchandise sales, TV broadcasting deals, prize money and player transfers.

Although the primary source of income varies among clubs, the football transfer market alone amounted to a record $48.5 billion from 2011 to 2020, according to a report last year by Fifa.

Today, leading clubs earn their revenue from diversified sources to offset the relatively small amounts generated from matchday receipts and broadcasting rights.

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As sponsorship and merchandising take the lead in revenue generation, clubs are effectively becoming brands in their own right.

Often open daily for tours, conferences, events and other sports matches, stadium assets are also being worked harder. Growing popularity towards the women’s league is also driving sales.

Akin to how football clubs use the strategy of revenue diversification, investors should also look to diversify when constructing their investment portfolio.

With share price movements of certain football clubs tracking their team’s performance on the pitch in the short term, some have a history of being volatile. However, their valuations have increased over the long term.

Currently, there are 10 football clubs listed on recognised stock exchanges: Manchester United, Celtic, Juventus, AS Roma, Lazio, Ajax, FC Porto, Borussia Dortmund, Sporting Lisbon and Benfica.

Here are a few tips on how to start participating in financial markets:

How much to invest

It doesn’t take as much as you think to start investing. Even a small, but fixed, monthly amount is enough to get you started.

Generally, this amount should depend on your income and how much you have left each month after paying your bills and setting aside money for an emergency fund.

Diversify

As the old saying goes, don’t put all your eggs in one basket. In this case, don’t put all your money in one stock or one type of asset.

Instead, you could consider investing in exchange-traded funds (thematic funds that hold several stocks) or a range of companies that you know and trust.

You can also look at property or commodities such as gold — whatever fits your investment strategy and risk tolerance.

Make sure you don’t put all your money into one “basket”, or in this case one football team.

Tools

It is important to choose a trading and investing platform that ensures investing is easy and cost-effective, while also helping to continually educate you.

The platform must help to remove friction and complications, so your investing and trading experience is seamless.

Remember, trading and investing don’t need to be expensive. Also, it is never too early to invest and/or trade in markets.

What to choose

A basic index tracker fund is an easy way to start.

It follows the performance of a particular stock market, using an ETF, to provide you with information on companies you know of.

But as a rule of thumb, the sooner you need the money, the less risk you should take.

Understand the products you are trading and investing in before you begin as all investments carry risk.

Finally, remain calm and steadfast. Stay patient rather than impulsive as you look for longer-term market gains.

Trading is no walk in the park, but equipped with the right tools, well thought out research, diversification and the right trading platform, you could be a proud part owner of your favourite team and a productive investment portfolio.

Muhammad Rasoul is chief executive of neo-broker amana