Domain investing, like any other investing, attracts investors with their own set of strategies and skills. As an investor matures she or he may fall dominantly in one of the following types of domain investors. Although an investor may also fall into another type to a lesser degree. So, if you are a domain investor, which type would predominantly define you?
Domain Investor – Position Trader
A position trader is an investor with long term strategies. She/he acquires the best domains available on the aftermarket, expired auctions, or new registrations and holds on to them for multiple years, waiting for the right buyer. This investor has a keen understanding of quality domains, and buys them at a reduced aftermarket or registration price. The current market valuation is not a primary concern because the investor has confidence that the value will increase over time. This investor acquires domains that are not a risk but hold significant value.
Domain Investor – Developer
Web developers are acquainted with domains through acquiring them for clients and development projects. Along the way they come across great domains that would be ideal for future projects. Overtime the developer builds a portfolio too large to realistically develop. Some domains are developed but most are put up for sale, likely as long-term holds or also quick flips.
Domain Investor – Flipper/Speculator
This type of domain investor focuses on quick flips. Buying domains at way below market value and from other investors who are getting rid of their domains before expiry date, usually around registration or lower price. The strategy is to flip a lot of domains quickly at above 100% profit. The profits from sales compensate for domains that are dropped because of no interest. This type of investor also pays attention to news on new, upcoming and emerging technologies and breaking stories and registers domains related to current news and hype. This also is an attempt to sell quickly while while a story is hot or at the peak of the hype.
Not all domain investors fall into one category only. They may have a multi-faceted strategy and divide their domain portfolio into separate lists: long-term holds, development names, and short-term flips.
Liquidity and cashflow are factors that can affect strategy at any given time. We will discuss this in more detail in later articles.