This is the last part of our four-part series designed to help domain investors make good decisions on building a portfolio, marketing domains for sale, and reallocating profits. We have identified one Grit Factor for each section that is a key to domain investing success.
Parts in this series:
* Reallocating profits - Rinse and repeat or level up? Grit Factor: Calculated Risk
Part Four - Reallocating profits - Rinse and repeat or level up? Calculated Risk
You’ve figured out how to acquire solid domains, a strategy to market and sell them and have made your first sale, great! Assuming the sale was profitable, you’re likely to start looking for additional domain names to acquire. It can be a good idea to consider reallocating some of the proceeds from a domain name sale to increase your portfolio size. But before jumping right into more acquisitions, it is important to consider how long it took you to sell that particular domain to get the realized return, how many other domains you have sold in that same time period and how much you will need to set aside for the annual carrying costs that come with holding your portfolio and other fees, taxes, etc.
Once you’ve decided on a reasonable percentage that you are ready to re-allocate back into new domains there are several calculated risk factors to consider.
1) What brought you success in your previous sales? A lot of successful investors focus on one or several specific types of domains (one word, short, geographical) and/or other niches. Everyone has a hobby, skill or profession that they have insight into and many domain investors naturally acquire great names specific to their interests and areas of expertise. Try not to stray away from what worked for you in the past by chasing a fad or allocating too much into an unknown niche.
2) Should you reallocate into one spectacular name or a few nice domains with solid resale potential? Scaling up into higher tier domains is usually a smart move but it's important to understand that even premium domains are not highly liquid assets and the best returns usually come with a lot patience. If you make a large acquisition, be sure you are ready to have that capital in the domain for a while or that you are buying it cheap enough to get liquid without taking a loss.
3) Ok, you landed a nice sale and have some fresh capital to deploy. Time to go straight to the marketplace and hunt down some deals or check TechCrunch for the newest trend and register a bunch of new names…right!? Many inexperienced investors can be too trigger happy and buy names quickly with less research after their first sizable domain sale. Remember that most domains are not liquid and the average domain investor only sells 2%-4% of their portfolio annually. Stay picky and make disciplined acquisitions as we discussed in part one, rinse and repeat.
We hope you’ve enjoyed this Entry to Exit, An Approach on How to Level Up Your Portfolio with Grit! Blog post series. As always, if you have any domains you need help with or are in need of acquiring a domain name you can contact any of our brokers directly. Happy investing!