How ‘Dollar Cost Averaging’ can help us succeed at FPL

There’s a concept in investing called ‘Dollar Cost Averaging’ (DCA) which describes the practice of investing in a stock periodically (e.g. a bit every month) as opposed to going in with one big lump sum. Part of its appeal is practical, we don’t always have access to all the money we might want to invest at one time but it is also popular because of how it can mitigate investment risk.

Since a big part of Fantasy Premier League (FPL) is managing risk effectively, this article will consider whether the principles of DCA might have value for FPL managers looking to improve their performance.

How Does Dollar Cost Averaging Work?

As mentioned, in its most basic form DCA simply describes a regulated method of spreading out a finite resource (money to invest) over time. However, because stock prices fluctuate over time, DCA also helps investors avoid putting all their money on a stock at its peak, only to watch it then decline.

For example, as opposed to buying 150 shares in one lump at £10 per share, an investor might buy 50 shares at £10 one month, 50 shares at £8 the next month and 50 shares at £11 the month after that. The net effect is that, via the second (DCA) method, the 150 shares cost £1,450 in total rather than the £1,500 cost of the lump-sum method. 

Of course, as the above example shows, share prices can go up as well as down so using DCA always runs the risk that it could end up becoming more expensive than a lump sum strategy, but risk management usually involves some trade-off with efficiency so that’s something most proponents will accept.

In FPL, our most significant finite resources are our player budget, the ever-declining number of Gameweeks, our transfers and the points we accumulate while playing. For this article, I’m going to focus on the latter two resources, as I think these are where DCA principles might be the most influential.

Transfers

One of the common strategic questions when it comes to FPL management is when in the Gameweek to use our free transfers; should we use them early in the Gameweek and maximise our chances of getting a player at their lowest price, or should we wait until the end of the Gameweek so we have the most team news available, even if that means we’ll have to pay more for the player (assuming we can even still afford him at that point)?

The reason this dilemma has no obvious answer is not just that both alternatives have their pros and cons but because we invariably seem to get it wrong; we make transfers early only to see the player get injured or we leave it late and pay over the odds unnecessarily.

A DCA approach would recommend choosing one of these strategies and sticking to it. In other words, you either make your transfers early or you make them late, but you never switch between the two strategies.

This would inevitably mean that you would experience some Gameweeks where it pays off and some Gameweeks where it doesn’t but it also means that, since you won’t be swapping between the strategies, you will definitely experience the full benefits of whichever strategy you choose and you will definitely not experience the worst possible outcome of both strategies – something which would be unfortunate but, also, very possible if you keep switching.

I’ll put it another way; if you swap between making early transfers and making late transfers, there’s a chance you will time it right every week but there is also a chance you will time it wrong every week; the FPL equivalent of buying a stock at its peak. Therefore, you could argue, this DCA-inspired approach is preferable because it averages out these eventualities, avoiding the worst-case scenario.

Captaincy

Another fairly intuitive application of the DCA method would be towards captaincy choices. In the first nine Gameweeks of this season, I have chosen four different captains and this approach seems fairly typical for FPL managers; we tend to hand the armband to whoever we believe has the biggest upside that week or, sometimes, a player so heavily owned that to not captain them seems to be a bigger risk than it is worth.

The DCA approach, on the other hand, would involve picking one captain and sticking with them, perhaps even for the whole season. This is currently a hot topic of debate amongst the FPL community, with many pledging to permanently captain Mohamed Salah (£12.9m) due to his phenomenal season. While it is very unlikely that you would ever maximise your potential captaincy scores via this method over a season, it does mean that you’d reduce the possibility of the worst-case scenario; captaining the wrong player each week. This is the captaincy equivalent of ‘buying at the peak’.

You could consider this a defensive approach to captaincy but it’s also a method that at least one former FPL winner (not me) has applied and, on this basis, obviously has the potential to succeed – provided that you pick the right player in the first place.

Points and Hits

Finally, points are a resource that we accrue throughout the season but we have the option of spending points in return for additional transfers in the form of four-point hits. The problem with these is that they can mount up over time and, while they may pay off, the risk that they don’t pay off increases with every hit you take.

A DCA approach to taking points hits would involve some form of regulated metering of them over time. For example; you could decide to limit yourself to just one -4 each calendar month and thus a maximum of 10 over a season. This method would effectively rule out a -8 or -12 hit and, while it would also, therefore, rule out the possibility of a -8 or a -12 hit paying off, it would also rule out the possibility that it would backfire horribly (you can decide for yourself which you think is more likely).

It would also help prevent you from falling into the dreaded ‘hit spiral’ where your points spending gets completely out of hand and you end up throwing good points after bad to try and dig yourself out of an FPL hole.

If you wanted to, you could adapt this approach so you can accrue ‘unused hits’ from month to month, leaving open the possibility, say, of taking a -8 in February if you took no hits in January and so on. You’d have to keep track of what you’re doing but I don’t see that this would fundamentally undermine the principle of the DCA approach.

Summary

Dollar Cost Averaging is a system of staggering your investments in a way that avoids the worst possible outcome of buying all your stock at its peak. By definition, however, it can never deliver the best possible outcome either, it is, in this sense, a fundamentally conservative strategy.

The way that the DCA method manages resources has applications to FPL, including when to make transfers, how to choose captains and whether to spend points. In none of these instances is it the ideal method for maximising your points return or ‘payoff’ but not every potential payoff in FPL needs to or even benefits from being maximised.

There are certain aspects, such as those discussed here, where you just want to avoid getting it wrong too often so you can find your advantages via other avenues (e.g. squad selection, differentials, squad value maximisation etc) so, while you probably wouldn’t want to build your strategy entirely on DCA, it could certainly have a useful part to play in it.

Having said that, it would be a mistake to assume that the Dollar Cost Averaging method would necessarily produce average results. When to make transfers, for example, is a strategic decision with the best approach often varying depending on the dynamics of the particular season. Similarly, the practice of picking a single captain will vary in efficacy depending on who you pick and how reliable a performer they are. Make a good selection (for example, Salah so far this season) and your captain points return could well exceed the average of those who switch the armband around.

Ultimately, managing risk doesn’t mean achieving no risk and, while we often talk about ‘mavericks’ and ‘dullards’ in FPL, the ideal strategy usually falls somewhere in between, with managers knowing how and when to take a punt and how and when to play it safe. DCA could be a useful approach for handling the latter part in a consistent and disciplined way.