Categorized | Domaining Tips

How Much of Your Net Worth Should You Invest in Domains?

Posted on 24 September 2015 by Andrei

I believe it’s reasonably likely that at some point in the future, investment grade domains will be recognized as a “status quo” asset class. In other words, the average investor who up until this point limited himself to asset classes such as stocks, bonds and real estate will start taking domains seriously.

Therefore, today’s question has to dimensions:

1. How much of your net worth should you invest if you’re a domainer?

2. What percentage of their net worth should non-domainers invest?

I will start with domain investors. If you are an experienced domain investor who knows what he’s doing, it makes sense to invest a considerably larger chunk of your net worth in this direction than someone who has had no exposure to the industry whatsoever.

I think that for professional domain investors, even having as much of it as 50% of their net worth allocated towards domain names makes sense. After all, your experience enables you to develop an edge and therefore, you’re in a far better position than most people to invest in this particular asset class.

As far as people who are not professional domain investors are concerned, they should in my opinion treat domain names as highly risky assets. Can they enable the average investor to do very well? Yes, they can but with high potential returns comes a higher risk factor as well.

For most traditional investors, even a 5% net worth allocation towards domain names seems on the high side. Realistically speaking, 2% to 3% would probably be reasonable enough.

For this reason, it will take quite a bit of time until traditional investors come and until the volume they put on the table is high enough to make a difference. First, domains need to start gradually becoming attractive for the average investor. Next, more and more investors need to hop on board so that, one investor at a time and 2% to 3% at a time, the money pool of our industry grows.

I expect this to be a painfully long process but in the long run, we will all be better off in my opinion.

3 Comments For This Post

  1. RaTHead Says:

    the correct answer of course is 17.8% with a variability factor of 5.6% … this is of course assuming positive EV on your domains. subtract .2 % for every 1% of your domains that are NOT dotcom. this is just my opinion however the maths on this are absolutely impeccable.

  2. Leonard Britt Says:

    Many individuals enter this industry believing domain investing is easy money. The reality is very different. Given typical portfolio turnover and median sales prices it is likely most individuals who have entered this industry in recent years are not generating attractive ROIs at a portfolio level.

  3. Will Says:

    Very well explained and I like how you gave both sides of the spectrum, the domain investor and the person starting out in domaining for the first time. There is a huge difference between both and that will definitely affect the amount of money they invest.

    The first initial investment MUST be education on the industry while slowly investing a bit in the process of experiencing buying and selling domains.

    A good way to go about is creating a monthly budget and a set amount you want to consistently contribute into your domain investing activities.This will help keep you from spending money you don’t have or feel guilty using it knowing the money you spend is meant to be used.

    – Will