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Domains Are Risk Assets and Prices Fluctuate Accordingly

Posted on 22 October 2012 by Andrei

A lot of people were surprised that domains fell in value over the past couple of years but let’s not forget that leaving parking earnings aside, the reseller market is and always will be affected by the international economic climate.

For those of you who don’t know what risk assets are, the principle is fairly simple.

If the global economy is doing good, people are more willing to take risks in order to generate higher returns. In other words, the current market sentiment is “risk on” and people are more willing to invest in things that generate higher returns but are riskier.

Domains and stocks, for example.

If the global economy isn’t doing good, people tend to be a lot more conservative and risk averse. In other words, the market sentiment is “risk off”.

Alright, that’s pretty much it.

As a domainer, we have to constantly adapt.

As a domainer who makes money on the reseller market, you have to be even more willing to adapt than domainers who have a “buy and hold” business model.

When buying risk assets, always understand that fluctuations can and will occur. The potential gains are higher but there’s no such thing as a free lunch, so those higher potential gains can only be generated if you are willing to take calculated risks.

There are always opportunities but you have to adapt and live in the present. Understand the past but don’t be stuck in it, look toward the future but without going overboard and being too much of a dreamer :)

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