Tuesday, July 15, 2014

Investing 100 Billion Isk – An Experiment

Unfortunately, I don't have 100 billion isk to invest—yet. However, last Saturday I started an experiment: IF I did have 100b isk and wanted to make profit by investing in items I predict will increase in price over the next few months, how would I spend that isk?

If you like spreadsheets, isk, or the market, you might want to give this a try, too! Or at least tell me where I went horribly wrong!

As my previous posts about market trading have indicated, my market will be “complete” when my trader reaches a stable 300 sell orders. Tycoon V is finally complete, and I have researched enough to decide what items to add to my trading roster, so in a week or two I will be “done.” Of course, the items I sell constantly change, but I at least will no longer be using the profit from trading—10 billion last month—to invest back into regional markets. Yet I don't want profit to simply build up in my wallet. I have future plans for what to do with all this isk I don't really need (helping new players and flying expensive ships, mostly!), but I'd like to keep investing what I make and, ideally, turn a profit.

So I am going to enter the new world of long-term market investments, which means getting into the spooky world of market speculation. And the first rule of market speculation is: don't talk about your speculations, else you ruin any profit you might obtain. So, the first thing I am going to do is break that rule and talk about what I would and, in some cases, likely will invest in.

This style of trading fits my goals perfectly, as I currently do not have much extra time to devote to the game. I would rather PVP or play with friends than manage more orders. Apparently, for most players who make long-term investments, long-term investment simply means buying PLEX and holding on to them. I would like to be a little more creative—and, perhaps, take a bit more of a risk. To get some experience investing, I've spent a while researching the market and how future changes to the game might drive certain prices up. And I've decided to do a little experiment. I'm pretending that I have 100b isk to invest. Last Saturday morning, I “bought” 100b isk worth of goods off the market in Jita and put the data into a spreadsheet. My goal? I have until December of 2014 to (attempt to) turn a profit on these items. I can sell them at any time, but I have to at least pretend like it is the real thing—so no mulligans, etc. First, I will explain some caveats about how my method here differs from how I actually would / will invest when the time comes. Then, I will look at what items I decided to (pretend to) buy and offer my reasoning behind the choices. 

So, first, the caveats:

1) I bought straight from sell orders in Jita. In the future when I actually do make investments, I likely won't ever do this because on some of the items below the buy order price is far lower than what I paid.

2) I plan to sell straight to buy orders in Jita. However, when I am doing the real thing, I may not necessarily do this--I may, for instance, ship these items out to other market hubs and sell them there. I figure, though, that if I can make a profit buying from sell orders and selling to buy order in Jita, I can make a profit doing the real thing.

3) Almost all the items I (pretend) bought--and almost all the items I will in the future actually buy--can also be used on my characters. This is a "fall back" strategy for my trading. For instance, the most obvious case in PLEX. I (pretend) bought a few PLEX. If there really is a market bubble--as some traders think--and the PLEX prices will sooner or later completely collapse, such that I can in no way make a profit on them, then I will happily apply the PLEXes to my accounts and write off the investment as isk well spent, not lost. This applies, to a lesser extent, to most of the items I bought. If they don't increase in price, I could use some of the stock of each myself.

4) Some of the purchases below--had I actually made them--would have made a noticeable impact on the market. Buying 2-10 billion isk worth of a single item is a not insignificant movement on the market (I will point this out in some cases below). So, my investments, if actual, would likely have made a change in the market. Hopefully when I do the real thing this will only help me, not hurt me.

5) No regrets! What will inevitably happen with this experiment is one of two things: If I made bad investments, I will be happy that it wasn't for real. On the other hand, if I made good investments, I will kick myself for not selling off some assets and doing it for real. So, I am going to try hard to have zero regrets, no matter what, as this is ultimately just for fun.

That said, here are the items, the quantities, and the prices (the prices are all rounded up):

Category 1: MHAs. I spent a small portion of the 100b on MHAs. If you look at the 6 month average, it is painfully flat. However, as of Crius moons in .4 systems can now mined. As this post on EVE Manufacturing explains, this will, at best, only result in something like a 6.5% increase in available moons. This was a speculative investment, but my fallback here is that if the price doesn't increase, I can ship these MHAs out to local areas and sell them for slightly higher, making up my investment that way. This is the only POS item I invested in even though much is changing with Crius--I simply don't know enough about the changes to make wise investments.

Category 2: Logistics. Some of the logistics ships are currently a bit low in price, so I made a few purchases (again, pretended to...). With how frequently they go up and down, it seems like it will be easy to at least break even at some point. However, if a large war ever heats up again, demand may bump their price up a bit as well.

Category 3: Recon Ships. A general rule with the market seems to be that if a ship is going to be rebalanced, even if that ship is not buffed, it will likely rise in price from increased demand. Well, Recon ships are sooner or later going to be rebalanced, and given how underpowered some of them are in the current meta, the prices will likely go up--so I assume!

Category 4: Limited edition items. Next, I invested a decent chunk of isk into limited edition but frequently used items--geno implants, leopards, and geckos. Ironically, Von Keigai at Deep in EVE just posted about investing in geckos! As he points out, these investments are risky given that CCP could add more supply at any time. It is unlikely more of these items will be added to game before the winter holidays of 2014, hence why one of my goals with this experiment is to "sell" the items off before December 2014. Until then, these items are all likely going to increase in price. In fact, look at the price I got the Leopards for: 75 for 63 million each, rounded up, Saturday morning. Now look at what they are as of July 15: 71-72m in Jita with, to be honest, a limited supply at those prices across New Eden. Things are looking good so far here.

Category 5: PLEX. Obligatory PLEX investment. I don't want to rely on PLEX investments--presumably there's isk to be made elsewhere, too.

Category 6: Three Nestors. This is probably the worst investment on the spreadsheet, considering they are already overpriced! Had I gotten them from buy orders, I could have picked 3 up for around 1.2b sooner or later as well. However, I just have this feeling, deep down, that CCP Fozzie can't sleep knowing that this ship is so terrible, and that he will one day make it useful...

Category 7: Bombers. Just a bit of investment into bombers, as their prices are decently low. If a null sec war picked up, I expect there prices to spike, at which point I can make a small profit. On the other hand, I could use all 170 bombers for crazy bombing runs...

Category 8: Strategic Cruisers. Finally, strat cruisers. Another very risk investment. Their prices inch lower every few weeks. Someday, they will be rebalanced. I didn't spend much here, because who knows when those changes will come--or what they will look like (or even whether they will cause a increase in prices, as I sort of think a lot of people have invested into SCs).

Those are my experimental investments--for now! I may add more items as I research--and, soon enough, I will be doing this ~for reals~

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