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What’s Your Edge?

Posted on 29 December 2013 by Andrei

I’m confident all of my readers have an edge that can help them as domainers or investors in general, even if many of them don’t realize it yet. Your edge doesn’t necessarily have to be something like a technical background that enables you to be good at picking domains related to your niche.

In my case for example, the #1 edge I have as an investor is the fact that I’m a cheap bastard. I absolutely love saving money and hate spending just for the sake of it. I said this on DomainingTips on more than one occasion and I’m proud of it. In other words, I’m not a “consumer” who likes to constantly spend money on (sometimes useless) stuff.

Believe it or not, most investors don’t reach their true potential because they let personal expenses get out of control. It’s especially true for young people but experienced individuals are often guilty of this as well. For example, they make a niche chunk of change through their online project(s) but end up spending most of it on things like a fancy car.

Now the problem is this: whenever someone with limited capital spends a lot of money on a depreciating asset, he or she doesn’t just lose that amount. The person in question is also losing the opportunity to invest that amount in something that might generate huge returns down the road.

Now if you have lots and lots of money, things like a fancy car are just a drop in the bucket for you. In other words, they cost only a small fraction of your net worth. Realistically speaking though, how many domainers for example have *that* much money? Not many. Therefore, spending it wisely is extremely important.

Let me give you an extreme example.

Let’s assume John and Jack were partners in an online business, ended up selling it and both received 50% of the sales price.

Next, let’s assume John spends everything on a fancy car and that Jack invests his 50% in a promising company by buying stocks.

What were to happen if 10 years down the road, those stocks would end up being worth 10x more?

Simple. Jack would have 10 times more money, whereas John would have a car that’s worth a fraction of what he paid for it and which actually cost him a lot of money (over a period of 10 years, the costs associated with a fancy car tend to add up).

Now of course, nobody can guarantee that those stocks would be worth 10x more after 10 years. Realistically speaking, unless you’re very good or very lucky, the returns will probably be considerably lower but this is just an extreme example to get my point across.

John spent his entire net worth on a depreciating asset which costs him money to maintain, whereas Jack invested his entire net worth. The less money you have, the more opportunities you’re missing by spending it on depreciating assets.

So there you have it.

In my case, I’d say my personality is the biggest advantage I have. I’ve come to the conclusion that “stuff” doesn’t make me happy and therefore, have always been willing and able to make decent financial choices. The only exception is represented by things related to my health such as food, I spend considerably more than most people I know on anything that affects my health and encourage you to do the same.

What about you?

Maybe it’s your background, maybe it’s your personality, maybe it’s the people you know and so on. A lot of things can represent a competitive advantage, all you have to do is figure out what your edge is and find a way to put it to good use.

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2 Comments For This Post

  1. Tom Says:

    Yeah, but John likely lived life more fully, got more lucky with the ladies, and had more fun for those 10 years.

    Plus, if the subsequent investment of Jack failed, he’d be left with nothing except the memories of his partner’s good times witnessed through Facebook. :)

  2. Andrei Says:

    @Tom: in my opinion, you don’t necessarily need a fancy car to enjoy life. In fact, I’d say that the exact opposite is true. And regarding the investment sure, he might have ended up losing all of his money but that’s unlikely. The only thing 100% certain is that John’s car will constantly depreciate as well as require maintenance costs :)

 
 
         
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