The main assets of DN Invest are domain names. From time to time we invest in other asset classes too, but domains are at the top of our focus. We invest in domains to hold them as our assets until we decide to resell them, but we also purchase domains as our merchandise. It could be confusing to understand whether domain names are assets or merchandise in our case as DN Invest regularly trades with domains. We could say that domains are both to us and the only difference is how we would enter each domain into our books. Our accounting gets the info about whether we acquired a domain as our new asset or whether we treat it as merchandise.
We may acquire some domain name(s) as our capital assets. If we sell them, they bring us a capital gain, or loss. Domains that we declare to our accounting as merchandise bring us regular corporate income when we sell them.
DN Invest is not a fund. We are an investment company. Domain names are often considered virtual real estate. They could be capital assets or merchandise. While it is not usual that some company purchases 100 houses with the intention to resell them in the next 10 days, it is very likely for something like that to happen with domain names. Since there is still no strict regulation of how to treat domains when it comes to bookkeeping, it is up to each business to inform accounting about whether a domain name was acquired as merchandise or capital asset. Depending on the moment, and of course on the domain(s), at the moment of purchase we decide whether our purchase was made as an investment in capital asset or whether it was our business expense to acquire merchandise needed for our business.
Domain names are intangible goods, but that is not the only problem for understanding how to run books regarding them. Ownership of domain names is something like a license. You can’t purchase a domain name today and own it for life. You must pay renewal each year, or you can renew it for up to 10 years, but after that period you will need to renew it again. You are renewing your ownership of it. You own it for as long as it gets renewed.
Our main business is to make a profit from domain names. They are also our capital assets in some cases. DNinvest.co.uk is our domain name and we don’t treat it as our merchandise. In this case DNinvest.co.uk is our capital asset. If we purchase ExampleDomain.com with the intention to resell it soon, we will treat it as our merchandise. If we purchase DomainInvesting.com, we will most likely treat it as our capital asset and will not be looking to resell it soon. However, if we were to get a good offer, we would consider selling it and the income would be our capital gain. When we resell ExampleDomain.com, the income is our corporate income, because we treated it as merchandise. So we hold domains as capital assets and as merchandise, depending on our intentions.
Domain names are an amazing asset class. You don’t need a warehouse to store them (except an online domain registrar account), and you can transfer them to a new owner in a second. There are not many maintenance costs. The renewal fee is the only maintenance cost in most cases. More and more investors realize that domain names are a very good alternative asset class.
Some domain types became commodity and are not used for anything except as a store of value, just as investment gold. Both investment gold and domains have intrinsic value, but investors hold them just as storage for their money. Any one character long domain with the .com extension is worth more than a million US dollars today. If you get the chance to acquire any one character long .com domain name for less than $1MM, you should purchase it right away as it would be an exceptional opportunity.
We monitor the domain market every day and know all current trends. Some domain types can have the floor price of $12,000 USD per domain and if we notice a domain name of that type for significantly less, we purchase it right away with the intention to resell it and make a profit. We are also after keyword domains which often don’t have a known floor value, but based on our knowledge and experience we are able to calculate a fair value which would be accepted by buyers when we offer it to them. If we can get it for less than what we think is the fair value, we will purchase it. There are many opportunities of this kind. That is one part of what we do to make a profit. The other part is that we invest in domains for which we expect significant growth in value in the next few years, and often even in the next few months. We make our own predictions and projections and have specific domain types in our focus.
Constant market watch is part of our job, so in correlation with our knowledge and experience we are able to notice an opportunity and react on time. In some cases we notice an incoming decrease in value, so we have to exit or sell our merchandise and assets. As we are constantly monitoring the market, we are able to make the right decisions on time.