Domain Investing or Trading

Sep 15 2011

In a former life, I was a stock trader.  We used to joke on the desk that trading was the emotionless making money off of emotions.  When news came out, or statistics shifted rapidly, we were there to make a quick-buck off of shifting trends.  The soul of trading is rooted in speed – get in, and get out.  The same can be said of the domain trade, but often Domainers are stuck in a buy and hold pattern believing an $8 domain purchase will miraculously transform into the next million dollar Apple development.  (Perhaps this is a little dogmatic, but we’ve all passed on reasonable offers!)

Like some of you, I have been victim of this thinking.  It causes us to purchase 50 names with a similar root (e.g. 3D) in hopes that either the subject matter will become relevant, or someone will come along recognizing the value you convinced yourself was worth spending 500 bucks for.  These acts are the emotions.

“Investing” in domains takes some restraint because it requires you to take a long term risk.  You’ve heard about the “Greats” that purchased single word names (we’d trade our entire portfolio for), and have never sold a single one.  They bought low, and are still waiting to sell high.  I assure you, those days are over.  In order to make money as an Investor, you must be willing to take greater risk, in the hopes of generating greater reward.  If you want to make $10 grand on a name, you should be willing to spend $20 grand.

No doubt I’ll get the comments of nonbelievers who started with a great flip that turned $10 into $1000.  And this is precisely my point.  Few are able to restrain themselves to buy one $10 domain and sit waiting for the $1000 offer.  So until then, you must build your coffers as a Trader, if you don’t have the money to be an investor.  It may be a $69 purchase, sold for $200.  Or a $10 name purchase, sold for $50.  Trading is difficult and requires liquidity, and happens to be the subject of my next post.  Until then, have a solid Thursday.

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Outsmarting the Dumb, Outworking the Smart

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  1. theo

    Though this makes sense i disagree.

    I invest in a domain and when the domain name can hold it’s own with parking i just keep the domain.

    It requires some time investment but when you see the revenue grow it is just steering on the numbers.

    And the numbers don’t lie.. And they when they increase i have the numbers on my side and i can simply turn down lowball offers.. Coz i can do the wait game.. The domain name will pay itself back in renewals and make some profit on top of it.

    long term vision and being sure you can make the cash back on the renewals all automated.. Simple strategy that works for me.

    1. TuckerPerret

      Hey Theo, my first disagreement – no doubt, not the last!

      I actually agree with your perspective. I’ve purchased several names that I was sure were to catch on, even if slowly (I called these “investments”). While the names got little traffic, adding parked pages made it easy to justify keeping the names when they made enough for reregistration. I am, unfortunately, not so disciplined to hold with all my name purchases. I am the type far more likely to buy a name that CAN’T hold its own. So I cut and move on. One point I was trying to make (not necessarily contrary to your’s) is that to move on to names with greater value requires trading domains that generate more profit each time. Like your strategy and appreciate the comment.

  2. Leonard Britt

    Another tenet of trading is setting stop losses and price targets. Getting greedy on the upside can leave one holding on to a position which has already peaked and now consolidating (leaving valuable capital stagnant). Meanwhile holding a losing position can result in significant losses. With domains, an offer on the same domain doesn’t come around every day, week, month or even year. Thus, declining a reasonable offer can leave one without funds to reinvest. Renewing bad domains can be even costlier. I’ll admit to being guilty of all the above.

  3. theo

    All good tucker 🙂 no worries. all good.

    Flipping a domain name is good when you make cash out of it.
    I am just one of these person who feel when i am dead on the money i just stick to it.

    I do not understand Shane’s business but he is the plant guy. He knows that business so he has an edge there. i know shit about plants.
    And that can be very powerfiull if you know where you operate in and you know what you’re competitors are doing…You just need a platform to sustain your renewals and when the time comes you make the cash.
    Strong vision..
    And have some guts.
    And stick to your guns…

    But like i said you make sense and it does apply to alot of people.

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