Fine Tuning Your Domain Portfolio – Drop The Garbage, Reinvest Your Profits

Most domain investors start out with fairly mediocre portfolios. It’s okay, nothing to be ashamed of and we all (or most of us) started with portfolios of domains that sounded so good at the time but as we learn more don’t sound so good any more. The key to building a better portfolio really involves two very simple steps:

  1. Drop garbage names – I don’t mean to be blunt but let’s just cut to the chase. Some of the domains in your portfolio are garbage, dump them like garbage but keep track of how much money you’re saving on renewals, this is important.
  2. Reinvest your profits – every time you sell a domain you should be taking a fixed percentage of your profit and spending this on even better domains.

Step one is the hardest step and many new investors quit before they get past it. If your whole portfolio is junk it’s better to realize that early, drop almost everything, and then take the money you’re saving on renewals to start with a few solid names. Here’s an example:

Let’s suppose you have 300 domains. You’re not making many sales and don’t understand why nobody wants to buy your domains. Take a deeper look, are they really as good as you think they are? Chance are there’s a lot of garbage in there. So let’s say you keep your top 50 and drop the other 250. You have now saved around $2,500 in renewal fees.

Take that $2,500 and buy five names for $500 each, you now have a stronger portfolio and the money you saved renewing junk went-into buying real assets for your business.

Once you’ve done step one, it’s time to move-onto step two. Now that you have better domains you should finally see some sales coming your way. Of course this doesn’t mean that you can buy a bunch of names for $500 and suddenly the money starts rolling in. Selling domains is an art onto itself but with better names better deals will come your way.

So let’s suppose that you sell one of your domains for $4,000. Now pick a percentage you want to re-invest, say 25%. Now take that $1,000 and buy one domain with it, take the other $3,000 and put it in the bank. Now you have turned a $500 investment into an $1,000 domain and money in the bank. Rinse, repeat, and know that selling domains is hard work and even with $1,000 or $5,000 names, it still takes a lot of work to sell your names to the right buyer.

The idea here is simple, improve your portfolio over time by getting rid of junk and taking the money you save, along with a percentage of your profits and using this to buy better names. Remember, the hardest thing to do is admit that some of your precious domains are junk, but at the end of the day the sooner you can do it, the sooner you can start really building the portfolio you want.

{ 10 comments… add one }

  • Logan Flatt September 20, 2013, 11:20 am

    I might add that once you’ve decided to “drop” the 250 garbage domain names, don’t just wait for them to drop — price them using BIN at VERY low, compelling prices at Sedo, GoDaddy, and Afternic. That way, you have the opportunity to monetize the garbage domain names while you wait for the expiration date to not renew them, not only saving you $2,500 but potentially adding $3,000 to your kitty if you can sell just 100 of those 250 garbage domain names for just $30 each before they drop.

  • HowieCrosby September 20, 2013, 11:23 am

    That’s great advice Morgan, I’ve dropped a lot of old friends this year, well not that old, you get my drift! Great post.

  • Morgan September 20, 2013, 11:23 am

    Great point @Logan and completely agreed. If you can make some money on the names you plan to drop that only helps you improve your portfolio faster!

  • HowieCrosby September 20, 2013, 11:37 am

    @Logan has added a practical plan. It’s definitely worth doing that.

  • Paul September 20, 2013, 12:01 pm

    Sound advice on dropping the crap names. However, I wonder what the success rate is for somebody who registered 250 worthless names to pick out 5 quality $500 names.

  • Joe September 20, 2013, 12:07 pm

    Great post, Morgan and I definitely agree with Logan. However I’d suggest not spending more than $100 on each new domain for the first year. It’s too easy to get fooled by scammers while you haven’t the right knowledge of what makes a domain valuable.

  • Paul September 20, 2013, 12:31 pm

    Joe – I don’t understand that methodology. If you don’t understand what makes a $500 name how will you understand if a name is worth $100? Best case scenario your going to be clipping pennies on $100 names, the likely scenario is that $100 is eventually dropped or your renew and waste another 12% on your investment through the reg fee. Yes others will argue you can make money in this space, but I just don’t think it is the best approach for a new domainer.

  • Joe September 20, 2013, 12:45 pm

    @Paul

    It’s not like you suddenly an expert after you decide your first lot of crappy domains. It will take months if not years to acquire the experience needed to identify quality domains AND pay reasonable prices for them. It’s easy to overpay when one starts investing in domain names and any other field. Limiting your budget is a great way to limit your chances of overpaying during the first year, provided you have already learnt your lesson from the first drop.

  • Morgan September 20, 2013, 1:14 pm

    Love it! Some really solid comments here, appreciate everyone sharing their opinion!

    @Joe – I think it goes a bit deeper than that. If you find that most of your portfolio is junk the next move really is to educate your self and learn how to buy better names. I always recommend that people learn from their mistakes, then read, read, and read some more to learn how they can improve their buying strategy.

    Only then should people be looking at $500 names. I don’t expect people to buy names that they estimate will cost $500, instead I meant a name that they buy for $500 on a drop through a site like Go Daddy auctions or similar.

    If you take a portfolio full of hand-registered junk and replace it with 5-10 solid names that had 20+ bidders and ended in the $500 – $1,000 range I can tell you that you’ll have a much better portfolio.

    The most important thing to remember is that it takes time. Anyone looking to make a quick buck should definitely avoid Domaining. There’s a lot of money to be made but it takes a lot more time to learn the market than most people think.

  • Kassey September 20, 2013, 8:19 pm

    @Logan, Can you list the names on Godaddy for free?