Striking a Balance Between Liquidity and Portfolio Maximization

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The last couple of years have been abnormal for just about everyone. Between the effects of the pandemic and now the war in Ukraine, just about everything has gotten much more expensive. Demand for most things is higher and supplies are dwindling. With domain names, the best domain names are in stronger hands, and there are fewer top domain names available to purchase. Inflation is probably going to be the word of 2022. It doesn’t take an economist to see the effects of inflation everywhere, including domain names.

In order to thrive – or maybe even survive, I think domain investors need to strike a balance between maintaining liquidity (cash or cryptocurrency) and domain portfolio maximization.

On one hand, things are more expensive. Good domain names that come up for auction have many bidders willing to pay close to retail. Average domain names are selling for close to the numbers I would have set as end user BIN prices. The cost of living has gone way up. Put simply, investors need to have liquidity to operate.

In addition to these cash needs, there is the potential for bubbles to burst and markets to crash. This will undoubtedly create buying opportunities for domain investors. Having the liquidity to execute deals is essential.

On the other hand, inflation has gotten so bad that dollars seem to be worth less each day. The same can be said for some other currencies. People have been turning to hard assets as a hedge against inflation. I think valuable domain names are a good bet. In fact, I would rather have a domain name that costs $10/year to renew than other asset classes that have substantial costs (taxes, insurance, fees…etc) to maintain.

The dilemma is staying in a strong liquid position while continuing to buy appreciating domain name assets. I am happy when I sell a good domain name, but I think it would be better to have a great domain name rather than the cash, and it’s gotten tough to replace domain names.

When it comes to selling my valuable domain names, I need to be sure the deal is good enough to overcome these factors. It’s gotten very challenging to buy good domain names at good prices and it is difficult to pull the trigger on the sale side as well.

About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has closed eight figures in deals. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest. Reach out to Elliot: Twitter | Facebook | LinkedIn

2 COMMENTS

  1. Glad you chimed in on the changing economic headwinds.

    Inflation was the word of 2021. Hyper-inflation and liquidity will be the words of 2022. The Fed will will start interest rate hikes next week and keep hiking rates throughout the year.

    This is key –> “Good domain names that come up for auction have many bidders willing to pay close to retail.”

    Will wholesale aftermarket prices continue to rise or drop as liquidity dries up?

    Speculators accept changing conditions, or crap out.

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