On the one hand, I do agree that fortune favors the bold.

Therefore, I obviously pull the trigger if I see an acquisition opportunity that I believe presents a risk/reward ratio that’s asymmetrically in my favor. Not just when it comes to domains.

Whenever you do that, you essentially assume other market participants are making a mistake by not outbidding you and driving that asset’s price higher. And, hey, maybe you’re right.

However, there’s one dimension people frequently don’t pay attention to: TIME.

In other words, you’re buying an asset you believe is grossly undervalued, thinking that as time passes, the market will properly wrap its head around what’s happening and push prices higher.

However, the “as time passes” bit can be tricky.

In many, many situations, I guess you could say markets like moving in the direction of maximum pain for both buyers and sellers. Or, if you prefer, one might phrase it as markets remaining irrational for an extended period of time.

Through today’s post, my only goal is bringing an “ancient” trading adage to your attention: the market can remain irrational longer than you can remain solvent 🙂

To put it differently, it’s important to understand that the calculations you make in your head are worth exactly $0. Until reality validates your expectations, you don’t make any money and that can sometimes take a LOT longer than you anticipated.

Therefore, I believe it’s wise to always  pay attention to your liquidity situation.

There’s a fine line between properly chasing opportunities and being so aggressive that it puts you in financial jeopardy. Many domainers have fallen victim to the “too aggressive for his own good” situation over the years and you frequently see domain fire sales for this exact reason.

Sometimes, life happens… how well would you be able to cope with a financial emergency?

Are you liquid enough to withstand a reasonably strong punch or would you have to sell some of your best domains at pennies on the dollar?

If your answer is closer to the latter, perhaps it’s time to do something about it.