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How Much Does It Cost to Keep Your Portfolio?

Posted on 11 February 2013 by Andrei

One of the most common questions beginners have is something along the lines of:

“I have $x at my disposal, what next?”

A lot of people are tempted to invest their capital in lots and lots of registration fee domains and I’m not saying you can’t make money that way, not at all. What I’m saying is that investing your money in a handful of more valuable domain and investing your money in lots and lots of registration fee domains are two completely different things.

Completely different.

Let me explain why.

Let’s assume you have $8,000 at your disposal and decide to buy one very good domain.

Keeping that domain for 10 years will most likely cost about 100 bucks.

Let’s assume the renewal fee is a fixed $8 per year, so after 10 years, you’ve “invested” $8080. $8k to buy the domain and $80 to keep it.

Great.

Now let’s assume that instead of buying one domain at $8k, you buy 1000 registration fee domains at $8 each.

So you’ve invested $8,000 initially, just like in the previous example.

But that’s where the similarities stop.

To keep your portfolio, you have to invest $8,000 each and every year.

So after 10 years, you’d end up spending $88,000. $8,000 to buy the 1,000 domains and $80,000 to keep them.

There you have it, two situations which should make my point crystal clear.

In both cases, the initial investment is $8k but that’s the only similarity.

Again, I’m not saying you can’t make money in both cases, what I’m trying to explain is that you have to know exactly what the financial implications associated with both strategies are.

If you assume that spending $8k on a domain or on a handful of domains is the same thing as spending it on 1,000 registrations just because the initial investment is identical, you couldn’t be more wrong.

It seems obvious and it is but I’d say most domainers are guilty of, in one way or another, underestimating the impact renewal fees have on their portfolio.

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7 Comments For This Post

  1. Jeff Schneider Says:

    These are well taken points you make about the ROI on your investment capital. My advice to my clients is buy one Prime .COM name and move towards a Joint Venture with a sharp End-User. Parking Pods are not the best way to reach the Best and highest use of your .COMs inherent strategic Mass-Marketing qualities. They are far to valuable to leave parked for any extended time period.

    The Smart Money is employing my strategy right now.

    Gratefully, Jeff Schneider (Contact Group) (Metal tiger)

  2. Joe Says:

    IMO both paths are wrong for different reasons. While most $8 domains are worthless, putting all eggs in one basket is always a very bad idea.

    My advice would be to invest $8k buying 50-100 domains, building out those that are good development candidates and selling the rest to endusers.

  3. Jeff Schneider Says:

    @ Joe

    Let me ask you something? How long have you been a marketing analyst for the financial industry in order to make this foolish statement? I have forty plus years in investment experience in the Capital Structure Markets.

    You are clueless with the above statement. It shows you know very little about investing. Your advice will look foolish in the coming years and wished you took my advice over yours.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

  4. Jeff Schneider Says:

    @ Joe,

    You seem to think that .COM Domains resemble stocks according to your opinion. .COM Domains are much more analagous to irreplaceable commodities. So your eggs in a basket theme is flawed. I have 40 + years experience in Market Analysis of Financial Markets plus I was a licensed Stock and commodity broker. I assure you my advice trumps yours.

    Gratefully, Jeff Schneider (Contact Group) (Metal tiger)

  5. Joe Says:

    TBH you look more like a blog troll than someone with ‘40+ year experience in marketing analysis’.

    Common sense suggests my comment. Everyone knows that diversification is one of the keys to successful investing.

  6. Leonard Britt Says:

    Good luck trying to sell that domain you just paid $8k for for even 25% of that five minutes later. Point taken that reg fee domains are not likely to yield a favorable ROI.

  7. Andrei Says:

    @Leonard Britt: it depends on the type of domain and how liquid is it. For example, if you just bought a LLL dot com, I’d be able to sell it at considerably more than 25% minutes later because three letter domains are liquid.

    For other types of domains though, selling them right away might be harder but assuming that you bought a solid domain at a reasonable price on the reseller market, I doubt you’ll experience difficulties liquidating it if you’re willing to sell at a significant discount.

 
 
         
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