One of the things I liked about working at a large company was the opportunity to meet people in a range of professions. When one of our web developers approached me to discuss domain investing, I gave him the the first few tips that came to mind. Since then I’ve put together a more thorough list that should be a good start for beginners.

Don’t invest beyond your means
Start off slow, set a reasonable budget, and definitely don’t buy domains on credit.

Begin with researching just a few vertical markets
Unless you’re starting with tons of money, you should focus your money and time into a small number of specific industries. It can be confusing for beginners (and even old timers like me) to conduct good research simultaneously on multiple industries. I’ve found that focusing my research on one industry at a time is the easiest way to immerse myself in the state of that vertical. Researching recent sales, looking for unregistered domains, and searching drop lists and aftermarket lists generates valuable data for deciding where to invest. I keep individual files for each vertical I follow. In each file I list domains I want, domains I own, unregistered domains, and domains that are for sale in the aftermarket. These files help me get up to speed quickly when I spot a potential target on a drop list or at an auction.

Expand into verticals with healthy ad markets
On a very basic level if you see a lot of search engine ads for an industry then there is probably a healthy domain market. On a macroeconomic level, domain names are a substitute for online advertising. So where online advertising rates are high (finance, travel, automobile) the value and liquidity of good domains will be high.

I have a budget and a vertical–what next?
There are three main ways to acquire domains: registering ($8), dropcatching ($60), and aftermarket sales ($500+). Registering is the cheapest and easiest way to start, and is the most common starting point for new investors.

Find a way to search drop lists automatically
My favorite way to conduct these searches is using Snapnames “advanced search” functionality. They will send a daily list of domains expiring as far as 30 days out and allow you to watch or backorder the domain. Even if your budget doesn’t allow for dropcatching, getting a historical feel for what kind of domains drop will help you better understand the dropcatching market.