One year investment - best returns in a domain name
Suppose you had a $1000 to invest in domain names. What would be a good strategy for getting the best return?
Domain Buying Strategy.
Domains, like stocks, are growth vehicles for long-term risk capital.
One way to manage risk when investing in domains is to recognize two distinct classes of domains. These classes are not short and long, but instead traffic and non-traffic domains.
Traffic domains.
Traffic domains, specifically generic type-in names with growing convertible traffic, produce revenue streams competitive with alternate (non-domain) investments. Traffic names have earnings-based value if liquidation becomes necessary.
Non-traffic domains.
A non-traffic name portfolio requires constant churning before renewals to avoid negative cash flow. Some domainers churn big profits reselling non-traffic names. Yet, non-traffic names have no intrinsic value. Thus, they will never be as attractive as simply using unregistered names.
Historical Performance.
Consider the price performances for each of the TLDs (top-level domains) from 2001-2006.
It appears .com reigns supreme for absolute prices. However, the returns on the other TLDs are not bad either. 3-letter domains were a good bet from 2001-2006!
The following graph shows where domain names headed after 2006.
This chart is an extrapolation from the 1st. These projections assume .com domains continue to carry a substantial premium over other TLDs. However, all show hefty (30% and up) returns year-over-year.
While I do not suggest domains are better places to put your money than CDs, since domains are not very easy to sell. However, CDs or other bank deposit cannot compete with the returns a good domain offers.
Understand Your Investment.
LLL.com/net/org price appreciation over the last 5 years has been phenomenal. The price history chart deserves respect. However, late entry into rapidly ascending markets adds risk, not safety. Economic history is littered with examples of failed trend projections.
With that said, this may be an inexahustible trend, or it may be an unsustainable rise. Unlike the real estate market, there isn’t decades of history to compare. The advantage is these trends may continue indefinitely or crash. Of course, there has never been a domain name crash, as of yet!
For my purposes, the very expensive domain names are almost like buying art, old wine, or exotic cars. It’s not that anyone expects to use it, they just like to know they have it. People buy them more for ego than practical value.
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