15 Tips to Increase Blog Traffic

The blogosphere is a big and busy world with over 100 million blogs and growing. How do you attract visitors to your blog? Follow these simple tips to drive traffic to your blog.

1. Write Well and Write Often

Frequently updating your blog with useful content is the first step to building your blog's audience. The content you write is what will keep readers coming back for more. Make sure you have something meaningful to say to them and say it often to maintain their interest and keep them loyal.
Furthermore, post frequently to increase the number of chances you have for your blog's content to be noticed by search engines such as Google or Technorati.

2. Submit Your Blog to Search Engines

Get on the radar screen for the popular search engines such as Google and Yahoo! by submitting your blog's URL to them. Most search engines provide a 'Submit' link (or something similar) to notify the search engine of your new blog, so those search engines will crawl it and include your pages in their results.
It's important to understand that simply submitting your blog to search engines doesn't mean your pages will appear at the top of a Google search results screen, but at least your blog will be included and will have the chance of being picked up by a search engine.

3. Use and Update Your Blogroll

By adding links to sites you like in your blogroll, the owners of those blogs will find your blog and will be likely to add a reciprocal link in their blogrolls. It's an easy way to get the link to your blog in front of many readers on other blogs. The hope is that some of those readers will click on the link to your blog on the other blogs' blogrolls and find your content interesting and enjoyable turning them into loyal readers.

4. Harness the Power of Comments

Commenting is a simple and essential tool to increase your blog's traffic. First, respond to comments left on your blog to show your readers that you value their opinions and draw them into a two-way conversation. This will increase reader loyalty.
Second, leave comments on other blogs to drive new traffic. Make sure you leave your blog's URL in your comment, so you create a link back to your own blog. Many people will read the comments left on a blog post. If they read a particularly interesting comment, they are highly likely to click on the link to visit the commentor's website. It's important to make sure you leave meaningful comments that are likely to invite people to click on your link to read more.

5. Syndicate Your Blog's Content with an RSS Feed

Setting up an RSS feed button on your blog makes it easy for your loyal readers to not just read your blog but also know when you publish new content.

6. Use Links and Trackbacks

Links are one of the most powerful parts of your blog. Not only are links noticed by search engines, but they also act as a tap on the shoulder to other bloggers who can easily identify who is linking to their sites. Linking helps to get you noticed by other bloggers who are likely to investigate the sites that are linking to them. This may lead them to become new readers of your blog or to add links to your blog from theirs.
You can take links to other blogs a step further by leaving a trackback on the other blog to let them know you've linked to them. Blogs that allow trackbacks will include a link back to your blog in the comments section of the post that you originally linked to. People do click on trackback links!

7. Tag Your Posts

It takes a few extra seconds to add tags to each of your blog posts, but it's worth the time in terms of the additional traffic tags can drive to your blog. Tags (like links) are easily noticed by search engines. They're also key to helping readers find your blog when they perform searches on popular blog search engines such as Technorati.

8. Submit Your Posts to Social Bookmarking Sites

Taking the time to submit your best posts to social bookmarking sites such as Digg, StumbleUpon, Reddit and more can be a simple way to quickly boost traffic to your blog.

9. Remember Search Engine Optimization

When you write your blog posts and pages, remember to optimize your pages for search engines to find them. Include relevant keywords and links but don't overload your posts with too many relevant keywords or completely irrelevant keywords. Doing so can be considered spamming and could have negative results such as your blog being removed from Google's search entirely.

10. Don't Forget Images

Images don't just make your blog look pretty, they also help people find you in search engine listings. People often use the image search options offered by Google, Yahoo! and other search engines, and naming your images with search engine optimization in mind can easily boost your traffic.

11. Consider Guest Blogging

Guest blogging can be done when you write a guest post on another blogger's blog or when another blogger writes a guest post on your blog. Both methods are likely to increase traffic as your blog will be exposed to the other blogger's audience. Many of the other blogger's readers will visit your blog to see what you have to say.

12. Join Forums, Web Rings or Online Groups

Find online forums, web rings, groups or social networking sites such as Facebook and LinkedIn where you can share ideas and ask questions of like-minded individuals. Add a link to your blog in your signature line or profile, so each time you post on a forum or participate in another online network, you're indirectly promoting your blog. Chances are many people will click on that link to learn more about you.

13. Promote Outside Your Blog

Promoting your blog shouldn't stop when you step outside the blogosphere. Add your blog's URL to your email signature and business cards. Talk about it in offline conversations. It's important to get your name and your blog's URL noticed offline, too.

14. Nominate Yourself and Other Blogs for Blog Awards

There are a number of blog awards given out throughout the year. Nominating yourself and other blogs and bloggers can draw attention to your blog and drive traffic to it.

15. Don't Be Shy

The most important part of the blogosphere is its community and much of your success as a blogger will be tied to your willingness to network with that community. Don't be afraid to ask questions, join conversations or just say hi and introduce yourself. Don't sit back and hope the online world will find you. Speak out and get yourself noticed. Let we know you've arrived and have something to say!

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How to Invest in a Bull Market

A bull market is a rising market increasing by at least 20% from a bottom. Bull markets are times of prosperity and tend to last much longer than their counterparts, the bear markets. So learn to discern a bull market cycle and invest accordingly to help you thrive in a bull market.

EditSteps

1. 1
   Prepare for a bull market when prices are still falling during a bear market. Because bear markets are invariably followed by bull markets, it is important to raise cash and keep a handy wish list of stocks with target prices to buy, before a bull market begins. Bull markets tend to begin abruptly when things appear gloomiest, prices are in free fall, with no light at the end of the tunnel. When fear, pessimism, and pain reach their maximum, a bottom is reached, and a bull market begins. Here are things you can do to prepare for the birth of a bull market:
   
   
   • Save as much as you can. Cut down your discretionary spending, and raise as much cash as possible.
   • Sell bonds and other fixed income investments, so you can take advantage of the high returns of stocks in a bull market.
   • Sell gold when the Dow/gold ratio is well below the historic average of around 20:1.
   • Have plenty of cash deposited into a stock brokerage account, so you are ready to buy stocks once the bear market ends and a bull market begins.
   • Watch for a bull market to begin in the depth of a recession, when everything is still in free fall, and the economic outlook appears the darkest. If you wait till a recession is officially over, you would most likely miss a great portion of the bull market's gains.
2. 2
   Early in a bull market, when prices have just started to bounce back from the bottom, buy all kinds of stocks, but preferentially load up on the ones that have fallen the most during the bear market, typically the lower quality, cyclical stocks (such as Alcoa and Dow Chemicals). Lower quality stocks tend to have higher debt and lower margins and cyclical stocks are dependent on the business cycle, so they tend to be hardest hit in a recession, and will bounce back dramatically when the recession ends. Load up in stocks that belong to the hardest hit industries and sectors during the bear market, for example, the financial sector in 2008 and 1991. Likewise, focus on the hardest hit investment styles. If small cap stocks have fallen more than large cap stocks, buy small caps. If international stocks have fallen more than domestic stocks, buy international stocks. If value stocks have fallen more than growth stocks, buy value stocks. During the early phase of a bull market, only a few forward looking investors will believe things will get better and are willing to take new positions. As the outlook turns just a little less depressing, the market will start to move up from the bargain hunting.
3. 3
   Keep buying stocks and hold onto your positions as the bull market continues to rise, transitioning from early to mid phase. During the mid phase of a bull market, the economic outlook remains poor, but it will gradually seem less poor. Investors will begin to realise that improvement is taking place, and they will bid stocks up to their fair values. Fear of "double dip" will continue to keep prices in check from time to time, and a sizable minority will remain skeptical of the rally. The mid phase is usually the longest phase of a bull market and can last for many years. As long as skepticism in the market's recovery remains, the bull market will continue to rise, so be sure to hold on tight onto your positions.
4. 4
   As the bull market continues to rise during the mid phase, shift your focus more on high quality stocks and begin to pare down or sell the lower quality stocks to make room for higher quality ones. As the bull market matures, risk increases along with asset prices, and the hardest hit stocks tend to recover a lot more than higher quality ones (often lower quality stocks will go up by 300-400% when higher quality stocks go up by only 50-100%). As stocks prices go up, risk increases, so you should dial down risk by emphasising more on more on quality.
5. 5
   Know that when everyone finally concludes things will get better forever, the bull market has now transitioned from mid to late phase. At this point, euphoria sets in, and essentially all remaining bears turns bullish. As everyone is cheered by the improvement in the economic and corporate results, they will become willing to extrapolate it. Expressions like "new era", "new paradigm", "permanently high plateau", and "end of the business cycle" will be rampant. Parodoxically, future P/E may be low, based on overly optimistic projections for the next 12-month earnings. (Trailing P/E and P/E calculated based on averaged earnings over past 3, 5 or 10 years are always high, usually above 20, toward the late phase of the bull market.) Regret and greed become powerful forces, as the masses become jealous of the profits made by investors who were early, and they want in.
6. 6
   When everyone wants to buy, sell. Sell all the lower quality and cyclical stocks, if you have not already. Hold onto the highest quality defensive stocks if you are a long term investor.
7. 7
   Raise cash and get ready for the end of the bull market, to buy again during the next bear market. Hold off buying when the overall stock market has become irrationally exuberant, and remember that the next bear market is just around the corner.

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EditTips

• Don't be discouraged if prices continue to go up after you sold during the late phase of a bull market. It is far better to sell too early, then to have your profits turn into losses in the subsequent bear market. As the tech bubble during the late 1990s and its subsequent bust in 2000-2002 demonstrated, prices can remain irrational for a long time, but eventually reality will take hold. In the short term, the stock market is a voting machine, but the long term, it is a weighing machine.
• The most important thing to do in a bull market is to hold. Don't sell your positions too quickly for a small profit; wait until everyone is finally on board and the economic outlook appears rosy.
• High quality stocks are those that are prominent and conservatively financed, with no EPS deficits in any of the past ten years, have paid conservative dividends for at least 15-20 years, have low debt to equity ratio less than 1, ROE >15%, and consistent EPS growth. Low quality stocks are the ones that do not fit these criteria.
• Defensive stocks are typically those in the Consumer Staples, Healthcare, and Utilities sectors; cyclical stocks are typically those in the Materials, Industrials, and Financial sectors.
• If you are aggressive, buy stocks on margin and buy stock options during the early and mid phase of the bull market, and short initial public offers (IPOs) toward the mid to late phase of the bull market.
• Sell short leveraged inverse ETFs.
• If you afraid to buy individual low quality stocks during the early phase of the bull market, just buy ETFs in the hardest hit sectors. You need not fear, however, to buy individual stocks, if you diversify and buy at low enough prices.
• If you prefer mutual funds instead of individual stocks, that is okay. Whatever you do, just be sure to buy and hold in a bull market, and shift focus from low to high quality as the bull market cycle matures.

EditWarnings

• Avoid IPOs like the plague. Entrepreneurs time their IPOs at the peak of the business cycle, to take advantage of investor euphoria to raise as much cash for themselves as possible. As a bull market matures, more and more IPOs gets thrown upon the public, and the quality gets poorer and poorer toward the end of the bull market. I.e. IPOs with unproven business model and no consistent earnings (or even losses) are thrown onto the public. Many of these will go bust when the times of prosperity slows.
• Make sure to get completely out of low quality stocks once the bull market has reached the late phase. One of the biggest mistakes investors make is buying poor quality stocks during times of favourable market conditions. Avoid the temptations of trying to find cheap stocks when the overall stock market is overvalued and ending up with value traps that will lose big when market conditions turns sour again.

The 5 Things You Need To Do If You Want To Get Rich

The single most life changing lesson I ever learned about investing in stocks and the stock market came when I was a teenager.  I was reading the 1973 edition (4th edition) of The Intelligent Investor by Benjamin Graham in the white rocking chairs at La Guardia Airport, waiting to take a flight home to Kansas City from college to visit my family during Thanksgiving.  

Today, the same copy sits highlighted in my office, with notes scribbled around Chapter 8, in which Graham states, "Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.  That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgment."

Investing in Stocks Is Like Owning Private Businesses Because the Drivers of Success Are the Same

Although it was a long time ago, it was in that moment that I "got it".  If I owned 25% of a local ice cream parlor, my plan would not be to make money by buying or selling ownership from the other equity holders, taking advantage of their ignorance, greed, or fear.  Instead, my strategy would be sustainable.  I would want to make money by generating cash from ice cream sales, opening new locations, and plowing profits back into the enterprise for expansion.  If we couldn't earn a good return, the cash would be distributed in the form ofdividends so I could find something else to do with the money.  The stock market is no different.  An individual share of stock is no different than a limited partnership unit or a limited liability company membership unit.

My job was to take the cash I earned in my day-to-day life and use it to buy ownership of proverbial ice cream parlors.  I wanted great businesses that earned high returns on capital, had little to no debt, pricing power to protect against inflation, and strong franchises to act as insurance against the inevitable subpar management, which will come along from time to time.  I would routinely write checks and deposit them in my brokerage account, buying ownership in everything from industrial sealant manufacturers to teen apparel companies, regional property and casualty insurance underwriters to auto part stores.  The dividends would come in, get added to the new cash I deposited, and used to buy more ownership in firms that appeared attractively valued.

There were some fantastic capital gains along the way, but I hardly ever sold anything.  The general philosophy was, if I needed to sell, I made a mistake in the beginning.  Great businesses rarely change.  It can happen - just look at what became of Kmart and Sears in a world of Wal-Mart and Target - but it often occurs over long periods of time, right in front of you.  I loved the idea that, someday, the annual dividends of some of my investment positions would exceed the cost basis of the original shares.

I saved, and acquired, watching my net worth grow.  Even the Great Recession collapse, which caused equity prices to fall 53.9% from peak to trough from October 9, 2007 to March 9, 2009, was nothing more than an opportunity to buy more of the companies I loved and expand the wholly owned private businesses I controlled.  As a result, my net worth and income are far higher than they were five years ago.

Inexperienced Investors Continue to Sell Off the Very Assets That Can Make Them Rich

Yet, constantly, I hear from readers, and even my own family members, who, at the first sign of trouble, sell off the very assets that throw off cash and passive income for them.   It's like a farmer going out and ripping up the seed he planted only a few weeks prior.  You cannot get rich doing that.  Then, these same people, at the first sign of prosperity, use their cash to buy assets that lose value.  They will borrow money to purchase a $30,000 Ford, adding $7,000 in interest costs on top of it, but never once consider buying a $7,000 car, instead, paying cash, and using the $30,000 to buy shares of a high yielding blue chip stock like Royal Dutch Shell, which would throw off more than $1,410 in cash the first year.  Who cares what the stock price does from month-to-month or even year-to-year?  You now have an extra $352.50 mailed to you in cash every three months, with a very good chance of that figure getting higher in the long-run.  

You don't have to do that many times in life to make a difference.  Think about what we discussed this morning when we looked at how a $100,000 investment in Wal-Mart Stores a decade ago, with dividends reinvested, now pumps out cash dividend checks of $12,696.92 per year, or $3,174.23 every three months.  If Wal-Mart repeats that performance, and our theoretical investor continues to hold for another decade plowing dividends back into the DRIPor direct stock purchase plan, the math indicates that he or she will be collecting $51,258+ in cash dividends per year, or $12,815 every three months.  A single decision made twenty years prior would have enormous, lasting consequences for the better.  I don't care how rich you are, $51,258 in extra cash coming in automatically every year is real money, even if you want to give it all to charity.

The Checklist For Getting Rich

If you want to retire rich, there are five things you need to do:

1. Bring in more money than you spend, leaving a surplus.  There are only two levers you can pull to achieve this.
2. Place this surplus in some sort of tax-advantaged entity, account, plan, or organization
3. Put that surplus to work for you as you would an employee, avoiding unnecessary risk and earning a return that exceeds taxes and inflation by a comfortable margin.
4. Add to these funds year after year by depositing new surplus capital and reinvesting the cash generated by your holdings
5. Wash, rinse, and repeat for several decades

There is no magic to the process other than the miracle of geometric compounding.  It is so powerful that over a 50 year period, you could have 9 out of 10 starting investments get wiped out along the way and still retire much richer than you would have otherwise been.  Very few investors enjoy these returns, though, because they are constantly buying and selling, trying to make money by being clever and taking advantage of the foolishness of others, rather than collecting their share of the underlying earnings in the businesses they own.

How to Invest in Stocks

Everyone wants to be financially secure. If you have a house, your house may be your biggest "asset" early on, but you will need to live in it for the rest of your life. Do you want a financially secure retirement or a vacation house in the South Pacific? You must invest your savings if you plan to retire comfortably.

EditSteps

1. 1
   Save. Before you can invest, you need money. Don't start investing until you have a secure job and six to twelve months of living expenses in a savings account, as an emergency fund, in case you lose your job. Learn how to budget your money and to spend your earnings wisely. Most investors have to be careful not to spend any of their profits, and to keep some aside for future use, and for retirement, as well as emergencies.
   • Be prepared to always live within or even below and not beyond your means. This will help to ensure that you always have enough money.
2. 2
   Read. Before you start investing, you need a basic understanding of what a stock is, what it means to invest, and how to evaluate stocks. Get some basic books in stock investing. Aim to read every book on investing you can get your hands on. Here are some of the very best books and resources for all serious investors:
   • The Intelligent Investor by Benjamin Graham. Get this on audio CD, listen to it a few times, and it will make a lot of sense. Focus especially on Chapters 8 (market fluctuation) and 20 (margin of safety).
   • The Interpretation of Financial Statements by Benjamin Graham and Spencer B. Meredith. This is a short and concise treatise on reading financial statements.
   • Security Analysis by Benjamin Graham and David Dodd. This book is considered thebible of investing and will tell you how to analyze corporate finances thoroughly. You don't have time NOT to read it. Get this book now, and master everything in this book. That being said, due to its age (it was published in 1934, just after the great stock market crash), it lacks some modern aspects; in particular, it does not tell you anything about the cash flow statement.
   • Expectations Investing, by Alfred Rappaport, Michael J. Mauboussin. This highly readable book provides a new perspective on security analysis and is a good complement to Graham's book.
   • Common Stocks and Uncommon Profits (and other writings) by Philip Fisher. Warren Buffett once said he was 85 percent Graham and 15 percent Fisher, and that is probably understating the influence of Fisher on shaping his investment style.
   • One up on Wall Street and Beating the Street, both by Peter Lynch. They are easy to read, informative and entertaining.
   • The Essays of Warren Buffett, a collection of Warren Buffett's annual letters to shareholders. Warren Buffett made his entire fortune investing, and has lots of very useful advice for real people who want to invest. Warren Buffet has provided these to read online free: http://www.berkshirehathaway.com/letters/letters.html.
   • If you have some time left, you should also read Buffett's early letters to his partners from 1956 to 1969; they can (for example) be found athttp://www.ticonline.com/buffett.partner.letters.html.
   • Buffetology, The New Buffetology and The Tao of Buffet, all by Mary Buffet and David Clark. These are basic books on the investment methods of Warren Buffett. The New Buffetology can be purchased on audio CD.
   • For a better biographic insight of Warren Buffet, read Buffett: The Making of an American Capitalist by Roger Lowenstein. This book will tell you how Buffett refined his investment style over the years and who he is.
   • The Secret Code of the Superior Investor, by James K Glassman. This is an excellent treatise on the importance of buy and hold.
   • Motley Fool and The Tycoon Report, both excellent online publications.
   • Wikinvest.com at http://www.wikinvest.com is a great place to find information on companies and concepts in the market. It is also helpful to conduct due diligence on the investment information sources themselves. Check out the performance and advice of websites, newsletters and blogs. One resource to conduct this research is at Greedreviews.com (http://www.greedreviews.com).
3. 3
   Think. Warren Buffet says that after you think, then think again. Warren Buffet says that if he cannot fill out on a piece of paper several reasons to buy a stock, then he will not buy it.
4. 4
   Practice. Trade stocks on paper before actually trading stocks with real money. Record your stock trades on paper, keeping track of dates of the trades, number of shares, stock prices, profit or loss, including commissions, taxes on dividend, and short or long term capital gains taxes you would have to pay for each trade. It is also helpful to record the reasons for each buy or sell decision. Calculate your net profit or loss less commissions and taxes for a meaningful period (1 year or more) and compare your results with the market index, such as the S&P 500. Do not start trading with real money until you are comfortable with your trading abilities.
5. 5
   Open a stock brokerage account with a discount broker. No specific recommendation can be offered here, as the stock brokerage business is a rapidly changing field. Trial and error is probably the only way to find a good broker, but you should do your own due diligence by checking out their site and looking at reviews online. The most important factor to consider here is cost, namely, how much commission is charged, and what other fees are involved. Discount brokers generally charge commissions of less than $10 per trade, some as low as $1 per trade, and some offer a limited number of free trades per year, provided you meet certain criteria. Other than costs, you should also consider whether dividend reinvestment is offered (which is the best way to build up your positions), what research tools are offered, customer service, etc.
6. 6
   Build a small portfolio of 10-50 stocks. Blue chip stocks are stocks of market leading companies known for quality, safety, and ability to generate profit in good times and bad, although they are generally fully priced and difficult to buy at a bargain price except in a severe bear market. Choose stocks of companies with proven records of profitability with at least some earning in each of the past ten years, pay at least some dividend in each of the past 15-20 years, at least 30 percent EPS growth over the past 10 years (using 3-year averages to smoothe out variations, for example, average EPS for years 2008-2010 compared to average EPS for years 1998-2000), low debt to equity (less than 1), and high interest coverage (at least 5).
   • Stay up-to-date with different value investing websites such as Motley Fool or Fallen Angel Stocks to see what kind of deals are out there.
   • If you do not have the time or inclination to learn about individual stocks, buying and holding no-load, low expense index funds forever using a dollar cost averaging strategy is best and outperforms most mutual funds, especially over the long term. The index funds with the lowest expensive ratio and annual turnover are best. For investors with less than $100,000 to invest, index funds are usually best. If you have more than $100,000 to invest, however, individual stocks are generally preferable to mutual funds, because all funds charge fees proportional to the size of the asset. Even the lowest fee index fund, Vanguard Total Stock Market Index Fund (VTI), has a 0.07% annual expensive ratio. This amounts to only $70 over 10 years for a $10,000 portfolio, but $700 over 10 years for a $100,000 portfolio, and $7,000 over 10 years for a $1,000,000 portfolio. If the expense ratio were 1.50% (typical for an average mutual fund), the fees would amount to $15,000 for a $100,000 portfolio, and a whopping $150,000 over 10 years for a $1,000,000 portfolio. See Decide Whether to Buy Stocks or Mutual Funds for more information whether individual stocks or mutual funds is better for you.
7. 7
   Hold for the long term, at least 5-10 years, preferably forever. Avoid the temptation to sell when the market has a bad day or month or even year. On the other hand, avoid the temptation to take profit even if your stocks have gone up 50 percent, 100 percent, 200 percent, or more. As long as the fundamentals are still sound, do not sell. Just be sure to invest with money you don't need for five or more years. However, it does make sense to sell if the stock price appreciates too much above its value (see below), or if the fundamentals have drastically changed since purchase so that the company is unlikely to be profitable anymore.
8. 8
   Hold on to the winners and do not add to the losers without good reason. Peter Lynch said that if you have a garden and every day you water the weeds and pick the flowers, that in one year you will have all weeds. Peter Lynch said that he was the best trader on Wall Street for 13 years because he picked the weeds and watered the flowers.
9. 9
   Avoid stock tips. Do your own research and do not seek or pay attention to any stock tips, even from insiders. Warren Buffett says that he throws away all letters that are mailed to him recommending one stock or another. He says that these salesmen are being paid to say good things about the stock so that the company can raise money by dumping stocks on unsuspecting investors.
   • Likewise, don't watch CNBC or pay attention to any television, radio or internet coverage of the stock market. Focus on investing for the long term, 20 years, 30 years, 50 years, or more, and not get distracted by short term gyrations of the market.
10. 10
    Invest regularly and systematically. Dollar cost averaging forces you to buy low and sell high and is a simple, sound strategy. Set aside a percentage of each paycheck to buy stocks every month. And remember that bear markets are for buying. If the stock market drops by 20 percent or more, move more cash into stocks, and move all available discretionary cash and bonds into stocks if the stock market drops by more than 50 percent. The stock market has always bounced back, even from the crash that occurred between 1929-1932.
11. 11
    Consider selling portions of your holdings as a stock appreciates significantly, at least 50 percent to 300 percent, based on quality of the stock. Use upper limit for better quality stocks. Letting your winners run as long as the story is still good will increase your long-term chance for success. Warren Buffet says that you should hold winners forever, but if the price-to-book gets too high (above 100 is definitely too high), you should consider selling the stock.
12. 12
    Consult a reputable broker, banker, or investment adviser if you need to. Never stop learning, and continue to read as many books and articles as possible written by experts who have successfully invested in the types of markets in which you have an interest. You will also want to read articles helping you with the emotional and psychological aspects of investing, to help you deal with the ups and downs of participating in the stock market. It is important for you to know how to make the smartest choices possible when investing in stock, and even if you do make the wisest decisions, to know how to deal with loss in the event that it happens.

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EditTips

• The share price of a stock has no relation to whether the stock is cheap or expensive. Refer to Motley Fool, Better Investing and other groups of "value investors" for advice on determining the fair value of a stock (an inquiry often discussed as fundamental analysis).
• Start a Roth IRA or 401k. You can save hundreds of thousands in tax dollars in the long run.
• Buy companies that have little to no competition. Airlines, Retail Stores and Auto Manufacturers are generally considered bad long-term investments because they are in fiercely competitive industries, which is reflected by low profit margins in their income statements. In general, stay away from seasonal or trendy industries like retail and regulated industries like utilities and airlines, unless they have shown consistent earnings and revenue growth over a long period of time. Few have.
• Try not to restrict yourself to any particular type of company. Understand that companies are in a sense 'black boxes' that generate revenue and profits––by becoming able to evaluate a company beyond a superficial glance––using Morningstar.com "5-Yr Restated" financials will help––you will be able to identify stocks in companies you haven't heard of and others haven't either--yet deserve your attention.
• Companies with strong brand names are a good choice. Coca-Cola, Johnson & Johnson, Procter & Gamble, 3M, and Exxon are all good examples.
• Aim to buy high quality stocks at temporarily low valuations. That is the essence of value investing. See http://seekingalpha.com/article/316476-10-safe-dividend-stocks-for-2012 for examples of high quality stocks selling at low valuations.
• Understand 'why' companies like blue chips above turned out to be good investments––their quality is based on their prior history of consistent revenue and earnings growth. By being able to identify those types of companies prior to everyone else, you will be able to reap larger rewards in your investments. Learn to be a 'bottom up' investor.
• Companies with virtual monopolies like Microsoft and Wal-Mart are good investments if you can buy them at a good price.
• Buy cyclical stocks when the general market is crashing to multi-year lows, then sell them once the market is recovered and at all time high. Cyclical stocks may have periods of strong growth followed by times of contraction. They may be difficult to own by the amateur investor.
• Invest in companies that are shareholder-oriented. Most businesses would rather spend their profits on a new private jet for the CEO than pay out a dividend. A return on equity (a common statistic) greater than 15%, a 2% dividend and large cash reserves are evidence of shareholder-oriented companies.
• Buy companies that are in profitable industries. Look for companies with profit margins greater than 10 percent. Media and beverages are the classic examples.
• Wall Street focuses on the short-term. This is because it is difficult to make predictions about future earnings, especially far into the future. Most analysts project earnings for up to 5-10 years and use discounted cash flow analysis to set target prices. You will only beat the market if you hold the stock for many years.
• The goal of your financial adviser/broker is to keep you as a client so that they can continue to make money off of you. They tell you to diversify so that your portfolio follows the Dow and the S&P 500. That way, they will always have an excuse when it goes down in value. The average broker/adviser has very little knowledge of the underlying economics of business. Warren Buffett is famous for saying, "risk is for people who don't know what they're doing."
• If you truly don't know what you're doing, invest in an index fund that is tied to the S&P 500 or Wilshire 5000. They will charge only a fraction the fees of other funds because they do not need to do any research.
• Alternatively, if you have the time and energy to learn about the market and its daily changes, consider learning how to trade options, futures, commodities, foreign currencies, preferred stocks, or bonds. Be warned, however, that these alternative investments carry greater risks and offer significantly lower returns compared to common stocks.
• Don't look at the value of your portfolio more than once a month. If you get caught up in the emotions of Wall Street, it will only tempt you to sell what is probably an excellent investment. Before you buy a stock, ask yourself, "if this goes down, am I going to want to sell or am I going to want to buy more of it?"
• Remember that you are not trading pieces of paper that go up and down in value. You are buying a share of a business. The health and profitability of the underlying business and the price you will pay are the only two factors that should influence your decision. (In addition, perhaps, to the social responsibility of the business).
• Always ask, will you make money? Buy and hold for the long term is the best way to maximize returns from the stock market in the long run.

EditWarnings

• Do not engage in insider trading. If you trade stocks using insider information before the information is made public, you may face prosecution. No matter how much money you could potentially make, it is insignificant compared to the legal troubles you could get into.
• Only invest in stocks money you can afford to lose and will not need for at least 15-20 years. Stocks can go down sharply over the short term, but over the long term they tend to outperform all other types of investment options. If you want to invest money you will need in the short term (within 5 years or less), consider bonds instead.
• Do not buy stocks on margin. Stocks may fluctuate widely without notice and using leverage can wipe you out. You don't want to buy stocks on margin, watch stocks plunge 50 percent or so, wiping you out, and then bounce right back and then gain some. Buying stocks on margin is not investing, but speculating.
• Stick with stocks, and stay away from options and derivatives, which are speculations, not investments. You are more likely to do well with stocks, but in options and derivatives you are far more likely to lose money.
• Do not attempt to time the market, guessing when stocks hit bottoms or tops. Nobody, other than liars, can time the market. It is a sucker's game.
• Do not day-trade or trade stocks for short term profits. Remember, the more frequently you trade, the more commissions you incur, which will reduce any gains you have. Also, short term gains are taxed more heavily than long-term (more than 1 year) gains.
• Avoid "momentum investing", the practice of buying the hottest stocks that have had the biggest run recently. This is pure speculation and not investing, and it does not work. Just ask anyone who tried it with the hottest tech stocks during the late 1990s.
• Don't blindly feed the dogs, namely, buying the stocks that have had the lowest returns and appear cheap. Most stocks are cheap for a reason. Just because a stock that was trading at above $100 and is now trading at $1 does not mean that it can't possibly go lower. All stocks can go to zero, and many have. Remember, it does not matter how low you buy a stock, if it goes to zero, you have lost 100% of your money. Always do your research before investing in anything.
• Don't blindly trust the investment advice of anyone, especially who will make money from your buying and/or selling (this includes brokers, advisers and analysts).
• When it comes to money, people lie to save their pride. When someone gives you a hot tip, remember that it is just an opinion.

How to Make Money By Creating Passive Income

The easiest way to gain financial independence is to reconfigure your life so that a substantial portion of your income is not actively earned by your labor. Instead, it must come from passive income. In fact, the idea of passive income is closely related to the Berkshire Hathaway model, which I explain in an earlier feature.

The basic idea of passive income is that it is money received with little or no effort required to maintain the flow of income once the initial work has been done. Some common examples of passive income are:

• Rent from real estate properties
• Patent royalties for an invention
• Trademark licensing fees for characters or brands you’ve created
• Royalties from books, songs, publications, or other original works
• Profits from businesses in which you have little or no day-to-day role or responsibility
• Earnings from Internet advertisements in a blog or on a website you own
• Dividends from stocks, REITs, equity mutual funds, or other equity securities
• Interest from owning bonds, certificates of deposit, other other cash and cash equivalents
• Pensions
• Residual income for a sales person on accounts that are typically renewed automatically such as a sporting goods representative that earns a commission on his accounts, bringing in a few thousand dollars per store per year for servicing the customers once they have been opened

Why You Should Prefer Passive Income to Active Income
Passive income is attractive because it frees you to spend your time on the things you actually enjoy. A highly successful doctor, lawyer, or publicist, for instance, cannot “inventory” their profits in the words of one well known author. If they want to earn the same amount of money and enjoy the same lifestyle next year (the year after that), they must continue to work the same number of hours at the same pay rate. Although such a career can provide a fantastic life, it requires far too much sacrifice unless you truly enjoy the daily grind of your chosen profession. Even worse, once you desire to retire, or find yourself unable to work any longer, your income will cease to exist unless you have some form of passive income. In the past, this was accomplished by employee participation in company-sponsored pension plans.

The Two Broad Types of Passive Income
There are two types of passive income and throughout your career, which ones you focus on will likely depend upon your current financial situation, talents, skills, and personality. The two categories of passive income are:

1. Passive income sources that require capital to start, maintain and grow
2. Passive income sources that do not require capital to start, maintain, and grow

Those who choose to focus on the first category of passive income will need either family money, funds from investors, or the nerve to borrow large sums by taking on debt to fund the purchase of assets. The easiest to understand is someone who takes out substantial bank loans to build an apartment building or buy rental houses. Although this can turn a very small amount of equity into a large cash flow stream, it is not without risk. When using borrowed money, the margin of safety is much smaller because you can’t absorb the same degree of setback before defaulting and finding your balance sheet obliterated.

Another example of the first category of passive income is someone who has an ownership stake in an operating business such as a factory or furniture store and allows the business to issue debt to fund expansion. The early store managers in Wal-Mart who were allowed to invest before the company went public were in this position.

Large investment portfolios also fall into this category of passive income. If owned $10,000,000 worth of blue chip stocks, you could reasonably expect dividends of $500,000 per year. Whether or not you spend your days playing golf, painting, or writing the great American novel, you would collect checks as those businesses paid out a portion of their earnings. The problem, of course, is that it takes the ten million to be in that position.

The second category of passive income - that is, passive income sources that do not require capital to start, maintain, and grow - are far better choices for those who want to start out on their own and build a fortune from nothing. They include assets you can create, such as a book, song, patent, trademark, Internet site, recurring commissions, or businesses that earn nearly infinite returns on equity such as a drop-ship ecommerce retailer that has little or no money tied up in operations but still earns profits for the owner.

The Path Most Often Taken to Passive Income
It seems that most common path to generating large passive income streams is to work at a primary job and use your actively earned income to buy assets that generate passive income on a regular basis.

The doctor or lawyer in our earlier example, for instance, could use his income to invest in a medical start-up or buy shares of medical companies he understands such as Johnson & Johnson. Over time, the nature of compounding, dollar cost averaging, and reinvesting dividends will result in his portfolio generating substantial passive income. The downside is that it can take decades to achieve enough to truly improve your standard of living but it is still the surest way to wealth based on the historical performance of business ownership and stocks.

Taxes and Passive Income
A major advantage of earning passive income is that it is often taxed more favorably than active income. That may seem unfair, but the idea is that it will give people an incentive to invest in assets that will grow the economy and create jobs.

A business owner that works in his company, for instance, would have to pay an extra 15.3% in self-employment payroll taxes compare to someone who merely had a passive interest in the same limited liability company who would pay only income taxes. In other words, the same income earned actively would be taxed at a higher rate than if it were earned passively.

If lower taxes and control over your time aren’t incentive to prefer passive income over active income, I don’t know what is.

More Information

This article is part of our How to Get Rich guide for new investors.

7 Rules of Wealth Building

Most parents want to teach their children responsibility - how to become self sufficient and succeed in life (after all, no one plans on raising a dead beat). However, very few actually accomplish this task. Why? Because, as parents, we are limited to the experiences our parents passed on to us; the antiquated notion that "responsibility" is simply getting a job, saving a little money, and maybe purchasing a car or some equally important item. Hopefully these seven rules will open your eyes and help you teach your children to avoid the traps that have stolen financial success from so many people.

Wealth Building Rule 1: Put Off Marriage

Your biggest obstacle to attaining wealth is YOU. Too often, people live their lives in a manner that is not conducive to creating riches and then get frustrated at "the system" when they only really have themselves to blame.

One of the most important financial decisions you will ever make ismarriage (more specifically who you marry and when). By putting off the walk down the aisle for a few years, you can save a decade worth of frustration. Your first goal should be to become financially independent, with little or no debt, and have your investments in place. Once you have these three things, your odds of success are drastically improved by beginning your journey on a level playing field (after all, the number-one reason for divorce is financial trouble).

Wealth Building Rule 2: Debt is a Disease

With a few notable exceptions, debt is a form of bondage; a disease that enslaves the borrower. A few years ago, there was a young lady attending college who shot herself because she couldn't pay back $2,300 in credit card debt. Although an extreme example, it is a testament to the power money has over peoples' lives. Imagine your life without owing anyone anything; your car, your house, your education, all paid for in full. Like what you see? When you want it badly enough, you will make extinguishing your debt your number one priority.

Wealth Building Rule 3: If You Don't Like Where your Parents Were at Your Age - Do Things Differently

The old cliché that "insanity is doing the same thing over and over expecting different results," holds just as true today as it did when it was originally written. If you don't like where your parents were at your age, stop what you are doing. During your childhood, they taught you all they knew about money. For many people, these early years established how they feel about their finances today. In order to become financially successful, you must do something different than they did. Otherwise, you will end up exactly as they are.

Wealth Building Rule 4: When you Begin a Job, Look at the Pay of the Highest Employee

Whether you are looking for employment now or are thinking about it sometime in the near future, one of the most important things for you to do is to look at what the top-dog gets at any company for which you are considering working. This will give you an idea of how high you can expect to climb in terms of earnings and promotion. If the CEO is making $30,000 a year, you have no chance to make six figures. Select a job accordingly.