Since every domain name transaction is by definition unique, it's hard to give advice that will be germane to a specific deal. Here are some general pointers that should help novice investors tiptoe around some of the pitfalls of domain investing.

1. There's always a bigger fish in the sea...

The scenario: a potential buyer emails you what appears to be an almost insultingly low offer for a domain name in your portfolio (e.g. $50.) It must be very tempting to simply delete the offer, or to fire back a terse email saying "The minimum offer on this name is $x thousand" - after all, a buyer with deeper pockets is bound to come along sooner or later... or later... or later!

Before rejecting any offer, no matter how insignificant it may seem, think about the answers to the following questions:-

A) How long have you owned the domain?
B) During that time, how many offers have you received on it?
C) How much was the highest offer for?
D) How frequently do you get offers on that domain?

You may see the transaction in a different light once you've had a chance to consider the fuller picture. For instance, a domain that you have owned for 3 years and which has received no unsolicited offers before now is hardly a hot sales proposition. Perhaps it's worth taking the $50 (or trying to squeeze the transaction up to $100 or so) and writing off that particular investment with a narrow profit margin.

2. Yearning for offers past...

Domain name offers are discrete events. In other words, an offer made by one party has no influence on the likelihood of receiving offers from other parties!

A common trap that many domain investors fall into is the assumption that a given offer will automatically repeat itself. For instance, a domain may have received an offer of $2,000 18 months ago, yet here's a potential buyer offering just $500. The problem is that the market 18 months ago was completely different from the market now and the market in 18 months will be different again. Holding on for an ever-higher offer when the grass is getting less green in the domain name field with every passing day is not particularly advisable.

3. Domains don't generally sell themselves...

It's a typical novice mistake: "I'll register a few domains, and buyers will be lining up to buy them off me."

For starters, they won't - real life just isn't that simple. But an equally fundamental point is this: how are they going to know the domain name is for sale? Novices don't do anything with their domains, leaving them unresolving (not pointing to anything) or pointing to the homepage of the registrar they used to buy it.

It takes just a few minutes to put together a simple one-page site saying that a particular domain name is for sale. That way, people typing in the domain to see what is there will know it's available on the secondary market. Of course, you can also incorporate affiliate links and PPC search engine links on that page to monetize the traffic.

4. Sorry, there's nobody at home...

When you register a domain name with the intent to resell it later, it's essential to make it as easy as possible for potential buyers to get in touch with you. That's why the information you enter in the domain's whois record is so important - if you enter an incorrect telephone number or an email address you never check, you will never hear from the majority of buyers. Unless you own the next "business.com", buyers are generally not going to make more than a token effort to contact a hard-to-find domain name owner.

5. At least I'm back where I started...

If you feel a sense of satisfaction (even relief) when you manage to sell just enough domains in a given year to pay for the renewals on the rest of your portfolio, think again.

What are you actually saying? "I went to all the trouble and effort of doing all these domain deals, and at the end of the day I made no money." Sounds less impressive when you see it that way - it's not exactly an exciting business proposition!

On the other hand, if it's coming up to renewal time and the sale of one of your favorite names at what you perceive to be a bargain price would pay for the renewals on your other names (in other words, you're minus for the year) then don't hesitate - sell!

6. Two times a large sum of money is a larger sum of money...

Be very careful about overpaying for domains. If the logic behind a prospective purchase on the secondary market goes something like this "Here's a domain that's selling for $500 - I'm pretty confident I could get $1,000 for it!" then leave your wallet in your pocket and walk away from the deal.

Domains are such an incredibly hard sell that there has to be a clear profit margin of many multiples of your original investment, in the case of secondary purchases at least (if you're registering new domains, you lost $10 per name if you bet wrong - no big deal). So you need to hunt for the real hidden gems: the $500 name that should fetch $5,000 or more... (or the $200 name that should fetch $1,000 or more, etc.)

The higher the potential margin that comes built into the deal, the more you can allow yourself to experiment, diversify and make mistakes. If the best you can do is double your money on a domain name sale, this means that you have to sell half of your entire portfolio just to be back at square one!

7. You take the high road, and I'll take the low road...

There is no "rule" dictating how investors should set out to make money from domain names. Some people content themselves with scooping up large numbers of new domain registrations, and counting on their skills in selecting marketable names to eke out a small average profit per name (e.g. registering names for $10 that will sell for $50). Other investors hold out for larger prizes, with the potential of greater payoffs. Both ways are right - and anything in between as well!

8. NEVER "bet" money you don't have...

Time to put the wit aside. It's incredibly important that you don't get trapped into a cycle of essentially "betting" that the next domain name registration will wipe out your losses. Many people have become trapped in a vicious circle of registrations, gradually sinking further and further into debt as the sum needed to wipe out the expenses they've incurred so far grows larger and larger.

In short, only ever invest in domains money that you can AFFORD TO LOSE. For every success story, there are dozens of people who have lost money betting on domain names - often significant amounts of money.

Here's hoping that fortune will treat you kindly... good luck!