I’ve wrote previously about growth versus value domain name investors. This might also be said momentum investors versus collectors. I’ll look at some principles I’ve learned, mostly by making mistakes. Momentum investing first.
Growth and Momentum domain name investors are looking for whats moving now. You can buy whats working now and wait and get retail offers, or operate in whats working now in the wholesale space.
In the wholesale space your trading among other domain name investors. The more trading being done paints a picture of liquidity, which draws more investors. The thought is you can own the name and maybe get a retail sale or inquiry. PLUS, have liquidity as a market moves up and other domain investors look for names in a certain niche or class.
The biggest benefit here is you can use short term capital to buy, because your thought is “I can always sell when I want or need to.” So this fits domain investors need to Buy Buy Buy. Normally domains names are il-liquid. In the rare niches and categories working now they can seem similar to stocks and real estate, which we all want.
You need to be accurate when doing growth and momentum investing because when a trend turns, it falls and falls. Most of the buying was based on a ready supply of future buyers, many of whom need future buyers. Once the perception rings home there are no new buyers, expectations drop, everything drops.
Many investors started out disciplined, watching their capital; then plunged in to a trend to somehow “make” it happen. Now your emotionally committed, you need this trend to work, your scared a bit when the buyers take a holiday. And sometime you can be stuck with unsellable at your cost inventory.
So the main recommendation I have with momentum investing in domain names is be active..unemotional and be willing to admit your were wrong ..early. Make mistakes with small amounts of money. And always be selling, only by being willing to sell and entertain offers, can you see if buyers still exist. If your a trader, in a hot trend, the only time you turn into a long term investor is when the party stops.. then you look at your assets as long term holds..but that is not why your bought them.
If in 2020, if your not seeing offers on your 3-D Printing, Geo+Service, LLLL, NNNNNN, Two Word New Tlds, Long Tail Search Words or Brandables: Be real and lighten up. Take losses. And retain capital for the next trend. You will probably have to sell below cost, do it. If you are being successful, stick with these trends. Be Real!.
Don’t always assume things will get better, without a specific reason. Hope is not a strategy.
You have to be able to take losses. If you can’t take losses, two things happen.
First, your like the gambler in a casino, you only leave when your out of money. If your holding out for your money back, you may end up not getting anything – or if you do hold, you will have shown courage to wait out everyone else. Show courage with friends, family and community – not declining domain names. Your left only with a closeout deal at the bottom, which will actually be a sign the market for those names is about to rebound .. a year later.
The old adage in the stock market is bottoms are built on time. So decide now to stay or walk away with some capital. If your waiting for the LLL market to come back because you paid $35k for a chinese premium now worth $20k; get ready to buckle in and ride out the trip to the bottom, some back and forth, then brief spurts of liquidity, then some fake falls, and when those drops are met with buying, a slow build back to the headlines of LLL’s are back. It will take time.
Your other choice is sell now, keep an eye on the market and be ready to buy in later, maybe at lower prices. But have capital. Micheal Douglas said it best in Wall Street.
Gekko: [to Bud] He’s right, I had to sell. The key to the game is your capital reserves, If you haven’t got enough, you can’t piss in the tall weed with the big dogs. Wall Street 20th Century Fox 1987.
Secondly, if your tied up in a declining trend, you will pull savings or borrow. Now your stuck in either long terms loans or no capital for what comes next. Borrowing to buy domain names works great, in the short term. Its good to have a savings cushion to step up when a great deal comes around. But have a plan based on price and time to sell, put the savings back and use the profits to build your business.
And if your themes and niches aren’t working, you need to start selling soon, before its clear to everyone else a theme or niche is fading.
And if a theme or trend is working, sell your middle and book profits. If your early, don’t sell your best quality too early. Sell your middle. They don’t ring a bell at the top of the market so the only way to get out up, is to have been slowly pulling off sales. Then when a theme gets overbought, your already halfway out the door. Your greed will tell you when a market is really rocking to buy more. Sure, buy more and trade more. But don’t keep more.
Tomorrow, some of my thought on collecting domains and longer term value domain names.