Last week I wrote a post titled, Is reciprocal buying a good strategy? To sum it up, my strategy from the start has always been to invest in the stocks that produce the best ROI (return on investment) and to sell stocks when I believe I can get a better return by investing those eaves elsewhere. But there are a lot of benefits to a reciprocal buying strategy in which I would buy and hold the stocks of those who buy and hold mine. I listed 5 benefits of reciprocal buying strategies in that post.
The post generated a lot of great feedback and discussion. Most people seem to advocate reciprocal buying, at least in theory, but most also said they wouldn’t necessarily buy back if the other player’s ROI was really low and wouldn’t necessarily hold if the other players share price and/or dividend really tanked.
The bottom line: there are few if any people who have a pure ROI strategy or a pure reciprocal buying strategy. Most have some sort enigmatic hybrid. A strategy that has few hard and fast rules and a lot of gut-level decisions.
So, where did I go from there?
Yeah, time for another experiment!
I decided last Wednesday I would do 5 things:
- Buy back, share for share, every person who invested in me. The only exception being that I only have pie to go up to 350 shares, so I couldn’t match above that.
- Not sell off anyone who was invested in me as long as they are active in the game. Just to be clear, if I held more shares of someone than they held of me and their share price or divs were taking a dive, I could sell down to the number of shares they had of me but not below.
- Check out the TeamZen and [X]Bar communities to see how the people in them help each other.
- Participate in Pendapolooza V
- Participate in the #2powerN group
What happened? In the 8 days since…
- My outstanding shares went from under 170k to over 200k
- My share price increased from 121 to 131
- Combining increased share price and dividends my investors earned more than a 20% return in the last 8 days.
It’s probably the best 8 day run I’ve had since I’ve been on EAv. The reciprocal buying experiment has been an unquestionable success!!!
However…
It’s unsustainable.
I’m bringing in about 140,000 eaves a day in portfolio dividends. I’m earning another 60,000 or so eaves from ~4500 shares a day purchased by investors. So, I have 200,000 eaves to buy back 4,500 shares. If the average price of the shares I was purchasing was around 40e, that would work. But the reality is the average share price of the people buying my shares is closer to 80e. I’m spending 400,000e to 500,000e a day to reciprocate share purchases.
I’ve been able to make it work so far buy selling shares of people who leave the game or have low ROIs and haven’t bought any or my shares. But I’m running out of those stocks in my portfolio. It seems like only a matter of time before I will start getting behind on my reciprocal buys. (I should say more behind, since I haven’t been able to reciprocate those buys of more than 350 shares)
But until then, I’m going to keep on going with the reciprocal buying. You can’t argue with the results!
How about you? What’s your strategy with regards to buy back shares of those who invest in you?
Empire Avenue Tips 
Nov 03, 2011 @ 14:20:24
Great stuff Paul, I try to buy back my shareholders as I can from divs, but I haven’t ‘officially’ because I’m still catching up with those who invest in me. I just can’t make the math work yet to do share for share, but I do my best to re-invest over time, and still invest in some new players. I readjust every day, and usually run out of eaves in no time flat 🙂
Nov 03, 2011 @ 16:51:56
I hadn’t thought of this before, but I wonder if the extent to which a person publicizes their reciprocal buying strategy impacts the number and type of players who invest and ones ability to keep up with the buy backs. I’ve been semi-public about my reciprocal buying by putting it in my status every day. If I had been quiet about it, I’m guessing I would have gotten fewer investments which would have made it easier to have eaves to buy them back. But I’m certainly not complaining. I love the challenge of trying to buy back more people than I think I can afford to buy back. 🙂
Nov 03, 2011 @ 14:28:29
I do something similar but slightly more targeted. Try and do recipocal buying with people who are local, gamers, or in the game industry. The idea being these are the people I want to engage the most. It may be slightly worse for raw numbers but in my opinion better for the overall goal of expanding influence and engagement.
Nov 03, 2011 @ 16:53:16
Anthony that’s a smart strategy and one I hadn’t seen mentioned yet. Good thinking!
Nov 03, 2011 @ 15:02:17
Paul, my results are similar to yours, but over a slightly longer period of time. In 20 days, my share price went from 76 – 106 and my outstanding shares went from 53,000 to 138,000. I, too, quickly determined that as a pure strategy it was not sustainable. However, here’s a couple things I did to make it more sustainable:
1) I consider my max to be 200. If someone wanted to buy more than 200 shares in me based on my stock’s value, so be it, but I only bought up to 200 in them.
2) I adopted some growth stock strategies to raise more cash to reciprocate buys with. I buy your recommended new stocks every day, along with other new stocks listed by other blogs. (I list those sources in a post here: http://www.empireavenue.com/community/page/discuss/?c=2418&d=61970500). Following this strategy adds an additional 100K to 200K in available funds daily as I sell these new stocks off once they level out (usually in 3-7 days).
The bottom line for me is that three weeks ago, I was going to punt this whole game because I realized there was no way I could get my divs up high enough to “win”. Now, with a mostly reciprocal buying strategy, I’ve cracked the top 100 in weekly earnings, am almost there in total wealth, and I still feel I can “win”.
Steve
Nov 03, 2011 @ 17:04:53
Steve, matching only up to 200 shares is a pretty good way of making a reciprocal buying strategy more sustainable. Plus, one thing I’ve noticed is a lot of the players who buy 600 shares of my stock are players who have been on EAv for a long time, and frankly, a lot of their ROIs suck. For the sake of this experiment I have actually had to sell off stocks with ROIs around 0.8% so I could reciprocate a buys of players with ROIs below 0.5%. Not really a great idea, and then I’m paying 2 commissions on top of that. 😛
It’s cool to hear your “conversion” to a reciprocal buying strategy gave you a second life here on EAv. I was essentially in the same place. I could see the writing on the wall a week ago when my share price hit 120 and my divs were at 1.1. The ironic thing is that this same week that I’ve been experimenting with the reciprocal buying, my dividends went from 1.10e/share to 1.34e/share. I’m on the good side of the magical 1% ROI, which I never thought I’d see again.
Nov 03, 2011 @ 15:15:04
I am a nibbler. I already know share for share is practically impossible so I do reciprocal buys but in smaller 10 to 40 block shares and leave a shout out with each purchase letting them know it is a start. I return later and buy another block of shares and eventually I do max out. My strategy is to invest in those who pay the most eaves first and work my way down my investors list from there until I have maxxed out at 200.
What I am finding is that every day using this strategy my earned eaves increase. and every day or two another shareholder is maxxed. There is also an added benefit for me as this allows me to build relationships with those shareholders as I am keeping in contact with them.
Nov 03, 2011 @ 17:08:02
Cheryl, I agree that nibbling has it’s advantages, including helping build build relationships as long as you’re both leaving shout outs. Good strategy!
Nov 03, 2011 @ 17:08:25
Cheryl – that’s basically the same strategy I’m using. First step is just trying to make sure I have *something* invested in everyone who’s invested in me. Step two is trying to max out in those who have already maxed out in me, starting with those that have the highest daily yield.
We’ll go from there… 🙂
Nov 04, 2011 @ 03:56:59
Scott, that’s about as close as you can get to a pure reciprocal buying strategy when you know you don’t have the eaves to match every investment share for share.
Nov 03, 2011 @ 17:42:57
Hi Paul, again a great information for a newbie like me :-))
My situation is very similar to Anne’s, still not enough earnings to match all buys, but trying. So I was starting to buy step by step one share from each of the top 100 to earn divs and looking for fresh faces with possibilities to grow fast and investing in 50 or 100 shares each. I’m not sure that’s the best strategy but my share price is the double since a few weeks ago.
Nov 04, 2011 @ 02:44:48
Hi Rolf, thanks for your comment. One thing I’ve learned is that there isn’t one right strategy that best for everyone. You’ve gotta decide what you’re trying to accomplish by playing EAv, and then figure out what works best for you with your time, connections & resources that will help you best accomplish that. Generally speaking, I think investing in a lot of different people rather than maxing out in a few people is a good idea. Investing in the top 100 (I’m assuming you mean by share price) is not always a good value because they’re so expensive, but on the other hand they often have a lot of wealth and are looking for new players to invest it in. Sounds like it’s working for you, and that’s what matters.
Nov 04, 2011 @ 03:03:40
Great stuff guys! I’m also a nibbler, only much smaller scale. I buy 5-10 of people who own more than me, and max asap on top earners in my portfolio.
I leave shout outs sometimes, but have elected to focus on connecting on twitter and facebook rather than EA. For starters, it’s a LOT easier to do, and the EA UI is not a great social platform, to be nice!
Here is a bit of strategy that I think is worth considering:
I am not seeking ROI buyers AT ALL. If my price jumps up too fast it will surpass my ability to generate positive ROI and then it will lead to selling, which is contagious and has a larger negative affect than missing out on one shot term buyer,
Slow and steady growth, gradually expanding my connections, and my DIVS, and my share price, and my Empire! 🙂 Looks good on paper anyway, lol!
Nov 04, 2011 @ 03:49:22
Thanks Russ. Steady growth is a good goal. Before starting the reciprocal buying phase I’m in now, I was definitely more likely to invest in someone with steady growth as opposed to someone whose share price was bouncing unpredictably up and down.
Strategy Debate: ROI vs Reciprocal Buying « Empire Avenue Tips
Dec 22, 2011 @ 02:22:17
Jan 04, 2012 @ 19:37:02
Reciprocity is open, random and supportive social networking while the opposite is close, selective and controlling private networking.