Is This Blog More Powerful than Doubling your Salary?

“Spend Less!”

“No, Earn More!”

The battle goes on, with scathing mockery volleyed between the opposing camps.

Mainstream personal finance pundits like Dave Ramsey and Suze Orman advocate lower spending for those in debt. Yet they have an apparently unlimited upper ceiling on how much increased spending can still lead to happiness, as evidenced by the high-spending lifestyles they are living today.

Here in the sensible middle, Mr. Money Mustache recommends both paths: earn as much as you can, but never sacrifice your soul to do it. At a certain level of income (which I feel is around $100,000 per person per year), the time to financial independence becomes so short that it becomes increasingly futile to earn more – that’s just how the math works out.

But all the earnings in the world are useless if you never know the meaning of the word “enough”. So get that concept in place right away – before wasting your time with increased income. Otherwise very little of that increased flow of cash will find its way into your ‘stash.

To illustrate this point with sparkling clarity, I am happy to share a neat little story and graph based on data provided by an MMM reader. He says this:

Comments: Your blog > Doubling my salary
Dear MMM,
I’m sure you receive many “thank you” emails a day for teaching your Mustachian values, but I bet you don’t receive “thank you” proof too often. I wanted to show you a graph, but I didn’t know how to attach it, so the following data will have to do (you should graph it if you get a chance).
The data below is my monthly net worth (according to Mint). When you graph it, you can see two distinct slopes. In both cases, my net worth is increasing, but my rate of wealth accumulation more than doubles at one point (Jan 2012). It goes from $600/mo to $1600/mo. What astounds me is that in March 2011, I doubled my salary and you can’t really tell. But in the months after I started reading MMM, my net worth starts increasing like crazy.
I believe that this is proof that reading your blog is more powerful than doubling my salary! Isn’t that nuts??? It certainly took a bunch more research/changes, but your blog is was the impetus. This rate change should take me from retiring in 30-40 years, to retiring in 10-20!

Following his advice, I graphed his data, added annotations, and this was the result.

The Effects of Mustachianism on Net Worth (click for larger)

I was naturally both pleased and intrigued by the result, and so I wrote back and asked our friend for more details on exactly how he accomplished these feats: both doubling his salary, and increasing his savings rate. The answer (note that I added a few links to relevant MMM articles based on his list):

So here’s how I was able to double my salary. Right after graduating college with a bachelors in mechanical engineering, I started graduate school. Tuition was waived, and I got a research assistantship making about $25,000. That seemed to be plenty to live on, but the research was boring.
In March of 2011 I quit grad school because I got a job at a giant company working in their corporate sustainability department. It’s a dream job because they actually pay me to calculate/analyze their carbon footprint! It’s great!
Anyway, my salary increased to about $50,000. it’s hard to admit, but I went through some major lifestyle inflation. I moved to a big city, which is 30 miles from where I work. I started spending money like it was my job to fill the new apartment with furniture, drive to work every day/upkeep the car, shop at Whole Foods, buy lunch at work every day.
I took some expensive trips across the country and I started spending more money on christmas gifts and charities. This all seemed like a great idea because as long as I had a fairly positive savings rate, I figured that that what I was supposed to do. I never took on debt/car payments/ credit card balance, and I tracked my finances reasonable closely.
So in December 2011, while searching for this article Men With Mustaches Make More Money, your blog popped up. Although I never found a post related to that news article, I knew I’d struck gold. I read every post you’d ever written in about a month. After that I read many personal finance books/blogs as well as investing books. It all started to become so obvious to me. Here’s a list of the changes I made in a relatively short period of time:

Started taking public transportation to work
Started biking anywhere within a few miles
Stopped buying extra stuff (tech gadgets, extra clothing, impulse Target buys)
Food:
switched to a super cheap Bosnian grocery with great produce
made lunch every day
cooked more meals
cut monthly grocery budget in half
Bought dry goods in bulk
fell in love with oatmeal
opened online savings account
opened Vanguard IRA (simple index funds)
got a 1% cash back card
opened a Vanguard taxable investment account (simple index funds)
Ditched Cable
Started doing home energy audits for friends/family ($100 each)
got a 4% raise because I “exceeded expectations” at work
increased my gas mileage from 24 to 27 mpg by slowing down
use gasbuddy.com to find cheaper gas
bought all LED light bulbs (got them super cheap through my work)
I can’t point to any one thing that accounts for the slope change. I just started making changes and they kind of built on each other. Now I get really excited when I get interest from my online savings account or reinvested-dividends from my index funds. I know my net worth is small now, but the slope is certainly heading in a better direction.
Use whatever info you’d like, and let me know if you’d like to know anything else. Also, if you ever have any energy efficiency/corporate sustainability questions, I’d be happy to help you out.

I’d like to thank this reader for sharing the happy story (he wrote it a little over two months ago). I can type to you all day about the counterintuitively large effect of making a bunch of small conscious improvements in your spending.. and indeed, some days I do just that. But until you see it applied to a real life like this, where the graph of your wealth takes a sudden bend and your mandatory work career is suddenly chopped in half, it can be hard to convince people of just how useful it is to understand your spending, instead of just endlessly chasing more income.

A Positive Attitude: The Essence Of Good Manners [BLOG]

As an etiquette instructor, most people think my instruction revolves around lessons in poise and posture, the importance of a firm handshake, and proper table manners. What they don’t realize is that, before I get into any of the manners skills training, I begin each and every client session with a very frank conversation about the importance of a positive attitude as being essential to having good manners.
Learning how to be more positive actually led me to my interest in teaching manners in the first place. As a New Yorker, I was born with the natural tendency to look at the more cynical side of everything, often viewing the glass as half-empty rather than half-full. Growing up in a household with an unhappy parent certainly didn’t add to my ability to look on the brighter side of life. It certainly hasn’t been an easy road, however, I had the good fortune to marry someone who is eternally optimistic and has inspired me to move forward in the right direction.
A positive attitude has no prejudice. It is not bound by color, race, or religion. It does not care if one is rich or poor. Anyone has the right to display a positive attitude, and it makes that person much more attractive to others. As far as making a good first impression, a positive attitude (coupled with an ear-to-ear smile) is a sure-fire way to show others you are likable, friendly—and a full participant in your life.
When I decided to immerse myself in manners, I thought long and hard about this concept of a positive attitude and how it can affect our relationships, our interactions, and our everyday circumstances. I began to look at people of all ages and noticed how many walk around with what I call “mad on” faces, like they have the weight of the world on their shoulders, barely able to crack a smile. And I realized that having a positive attitude—like having good manners—is a choice, and requires discipline and practice.
Here are two pieces of etiquette advice that I share with my clients, and that I aspire to live by on a daily basis.

Possess a great attitude!When you wake up each morning, choose to be upbeat and positive, as this helps to set the tone for the day. Life is one giant possibility, so why not embrace it with an open and willing attitude to try new things and take risks. You only have one lifetime, and there is no point in wallowing in negativity. Make a conscious choice to enjoy a happy and successful life.

Don’t Forget to Smile.A smile is critical and often overlooked. Find something to be thankful for each day and put a smile on your face. This will win allies and attract friends. A smile is the most inviting of all gestures. If you smile on the outside, your insides will follow suit. Practice your smile each day in front of the mirror when brushing your teeth, and in no time you will have a perfect, authentic smile.

How To Get Rich [BLOG]

That’s what so many want, right? I’m not going to lie and say it is not a whole lot better having lots of money. I had a whole lot of fun and loved my life when I was eating mustard and ketchup sandwiches and sleeping on the floor of a three-bedroom apartment that housed me and five buddies.

I have a whole lot more fun now. It doesn’t suck to be rich.
The question everyone wants answered, is how to get there. There are ways to get there. But there is not a template that works every time for everyone. Getting there requires being ready when opportunity presents itself.
Change and uncertainty create opportunity. Times like we are facing now, with complete financial uncertainty, are perfect times to start on the road to getting ahead financially.
First, here is WHAT NOT TO DO:
There are no shortcuts. NONE. With all of this craziness in the stock and financial markets, there will be scams popping up left and right. The less money you have, the more likely someone will come at you with some scheme. The schemes will guarantee returns, use multi-level marketing, or be something crazy that is now “backed by the US Government.” Please ignore them. Always remember this: if a deal is a great deal, they aren’t going to share it with you.
I don’t broadcast my great deals. I keep them all to myself. Also, if the person selling the deal was so smart, they would be rich beyond rich rather than trolling the streets looking to turn you into a sucker. There are no shortcuts.
So what should you do to get rich?
Save your money. Save as much money as you possibly can. Every penny you can. Instead of coffee, drink water. Instead of going to McDonald’s, eat Mac and Cheese. Cut up your credit cards. If you use a credit card, you don’t want to be rich. The first step to getting rich, requires discipline. If you really want to be rich, you need to find the discipline—can you?
If you can, you will quickly find that the greatest rate of return you will earn is on your own personal spending. Being a smart shopper is the first step to getting rich. Yeah, you have to give things up, and that doesn’t work for everyone, particularly if you have a family. That is reality. But whatever you can save, save it. As much as you possibly can. Then put it in 6 month CDs in the bank.
The first step to getting rich is having cash available. You arent saving for retirement. You are saving for the moment you need cash. Buy and hold is a sucker’s game for you. This market is a perfect example. Right at the very moment when cash creates unbelievable opportunity, those who followed the buy and hold strategy have no cash. they can’t or wont sell into markets this low, that kills the entire point of buy and hold. Those who have put their money in CDs sleep well at night and definitely have more money today than they did yesterday. And because they are smart, disciplined shoppers, their personal rate of inflation is within their means. Cash is king for those wanting to get rich.
The second rule for getting rich is getting smart. Investing your time in yourself and becoming knowledgeable about the business of something you really love to do.
It doesn’t matter what it is. Whatever your hobbies, interests, passions are—find the one you love the best and GET A JOB in the business that supports it. It could be as a clerk, a salesperson, whatever you can find. You have to start learning the business somewhere. Instead of paying to go to school somewhere, you are getting paid to learn. It may not be the perfect job, but there is no perfect path to getting rich.
Before or after work and on weekends, every single day, read everything there is to read about the business. Go to trade shows, read the trade magazines, spend a lot of time talking to the people you do business with about their business and the people they buy from.
This is not a short-term project. We aren’t talking days. We aren’t talking months. We are talking years. Lots of years and maybe decades. I didn’t say this was a get-rich-quick scheme—this is a get rich path.
Now you wait for times of uncertainty and change in your business. The time will come. It may  come quickly, it may take years and years. But it will come. The nature of our country’s business infrastructure is that it is destined to be boom and bust. Booms are when the smart people sell. Busts are when rich people started on their path to wealth.
You will know when that time is here for you because you will know your business inside and out. You will be ready because you will have been saving up for this moment in time.
With all the change and uncertainty in the financial markets, there are people right now making more money than they ever dreamed of. They are the ones who have been living the real estate market and the financing behind it and understanding what actually was going on. They’re the ones who understood the complexities of the credit markets. When everyone was following the crowd, they kept on saving their money and avoided the temptation of groupthink.
Boom and busts happen in every industry. The question is whether you have the discipline to be ready when it happens for you?
If you do, you will find out what it feels like to get lucky

Get Rich With: Blogging?

Well, there goes another million.
Sometime last week, this blog reached the “two million page views” milestone. It took less than three months to get that second million, compared to nine months for the first one, which I wrote about on December 10th. I remember we all thought we were pretty big business back then, but by any measure there are now more than twice as many Money Mustaches growing out there as there were when we blew past the first million mark!
Blogs that talk too much about blogging can get pretty boring, so don’t worry, I’m not going to write an article like this for every million. But today I thought it would be worthwhile because there are several interesting lessons that I’ve learned from this writing hobby that I’ve wanted to tell you about. Hopefully they will be useful for the many other blog writers that hang around here, as well as for writers of other stripes and even regular Mustachians.
Lessons Learned:
1 – It’s really hard to understand exponential growth.
Even though I occasionally like to write equations and draw graphs in my spare time, I still find that I have the natural human weakness of thinking in linear rather than exponential terms. When I check this website’s statistics page each night, it looks like readers are just trickling in at a steady rate, like guests to a nice party. But when you look at a graph that spans several months and divide out the numbers, you can clearly see that an exponent is at work. The exponent always surprises you.
This has applications in any internet-related business or creative venture, since the pool of people on the internet is effectively infinite. If you can get something started that has a positive growth rate, that tends to grow all by itself (by word of mouth, or search engines, or viral-style-forwarding), you can end up with some very interesting results. The Honey Badger video that we all like to quote from is up to 40 million views. A friend’s internet-based sales business is making tens of thousands of dollars per month in sales, just because of a bit of self-perpetuating exponential growth.
It also has applications in saving for early retirement. Beginner Mustachians are occasionally blown away by the numbers we throw around here. “Nobody could save hundreds of thousands of dollars!”, they say, “I’ve only got a few hundred bucks and it was damned hard to save that much!”.
I felt much the same way when I was younger. The problem is not with the numbers, it’s just with that tricky exponential function again. Today’s hundred-dollar-saver can invest his savings even as he improves his skills at efficient living and increases his employment income over his working career. When you combine all of these effects, you will see strong exponential growth in your savings. The hundreds of today can quite easily become many thousands per month in the future, until in the years just before retirement, many people are easily increasing their wealth by over $100,000 per year – sometimes more than their entire gross pay.
2 – People can actually make money with this blogging thing.
When I started writing these articles, I assumed I would only be entertaining myself and a few facebook friends until I ran out of stuff to say. The writing habit proved quite addictive, however, and the number of fun and enthusiastic readers grew. So I upgraded my goal slightly to “Saving the Entire Human Race from Destroying Itself”. But even at that point, I never thought I’d earn much more than the cost of paying the web hosting fees.
But one day, I had a look around at some other personal finance blogs. It turns out that these things are serious business. Sites that rank in the top 20 on the Wisebread list are routinely bought by internet marketing companies, often for over a million bucks. One clever guy named Pat Flynn who runs smartpassiveincome.com is an expert at generating income from websites. Last year he raked in over $400,000 from his carefully designed portfolio of sites. Get Rich Slowly, possibly the biggest blog in this niche, sold over three years ago although the sale was a secret until recently.
The most surprising part is that MMM already has a larger amount of traffic than some of the big-name websites at their time of sale. I don’t know exactly why this has happened, since we have done almost no promotion of the site. But I like to chalk it up to the fact that Frugality is the New Fanciness. This is an idea whose time has come.
In the right hands and with enough flashing credit card ads, a site this big could probably already earn more than my software job used to pay. You can tell from my feeble attempts at revenue-generation that income is not one of the main goals of this blog. But I will still proudly note that we earned $500 last month, and the income graph also has one of those sneaky exponents at work!
And don’t worry, I am not even thinking about selling this thing. Someone did send me an unsolicited offer once for something like $10,000, and I thanked him for the information. But it seems unlikely that anyone would want to pay in the millions for a blog, with the condition that the author can continue to write (or not write) whatever he wants and quit at any time without notice.. with anti-consumerism, political incorrectness, and swearing  being key parts of the message.
But I do love learning about this entirely new field, and I am pleased to see that writers now have a more democratic way of making a living than they did back in the old paper publisher days. Even big-time authors like Joe Konrath now publish exclusively in e-book formats, and they find they earn more money doing that then they could with big traditional book deals.
3 – It’s Time for Mr. Money Mustache to Get Off His Ass and Write.
The biggest thing I have learned from this Two Million Views business is that we are onto something big here. If this blog really is one of the fastest-growing things in the entire personal finance blogosphere, then maybe I’d better start taking it a bit more seriously.
So I’m going to set a couple of goals. I’d like to increase the amount of time I spend working on this site. Not to the point of burnout, but I’d at least like to get a chance to write up more of the 100+ draft article ideas that keep piling up, and  answer more of the emails that people send me. I’m going to talk to more people, take better pictures, start putting out the odd amusing educational video, do more science experiments.. stuff like that. I’ve even applied to be a speaker** at this year’s “FinCon” (financial bloggers conference) since it’s right down the road in Denver, and hey, I like talking.
I’d also like to set a goal of having this writing gig pay for my whole family’s living expenses. That’s about $2000 per month. Yeah yeah, we’re already retired and all that, but I think it would be nice psychological boost to be able to say that I’m supporting a family just with writing, and more importantly to share my thoughts on how easy or difficult it is to do without any soul-selling.
In reality, since we already have our consumption covered from other income and we have no desire to spend even more money, that means that 100% of MMM proceeds will in some way, over time, be used to improve the world. I’m not sure exactly how yet, but I still like the idea. Plus, as blog writing increases, my carpentry income has to decrease, which eats into my safety margin. By making a point of having the blog earn just a little bit of income, I can regain this margin.
We Mustachians are still a brand-new family. Most of the world has barely even heard of us so far. This site hasn’t even cracked the top 100 on Wisebread’s widely-cited blog list, since they aren’t measuring website traffic or even feed subscribers (if they did we’d be in the top 40 or better!).
That’s fine with me, since I’m here just to write to you and I have my own way of defining success. But if you do want to help out, here are a few ways to game the system a little bit:
Follow MMM on Twitter by clicking here.
Befriend MMM on Facebook by clicking here.
Become a RSS subscriber by clicking here.  Even if you usually read on the website (which is the way I prefer to read blogs), this helps boost the still-important Feed Subscribers number, and you might learn a thing or two about the convenience of RSS reading as well.
Hardcore readers can install the Alexa Toolbar* which will boost this site’s Alexa Rank.
Some generous people have actually asked me if they could donate to this blog just to say thanks. I have always said no in the past, but given the new goals above, I will now accept that generosity and see how it goes. This is of course fully optional.. if you just want to read for free, please continue to do so!
This Paypal Button

Or the Tiptheweb Service: Tip
Or the Flattr Service

In the long run, the biggest fundraiser for this blog will probably be the MMM Recommends Page and the Commission-paying Rewards Credit Cards list. I like that method, because those things are tucked out of the way, useful, and non-spammy.
That’s enough of this behind-the-scenes stuff, it’s time to get back to the real world. Thanks again for reading and I’m looking forward to taking it all up several notches as the blog begins its second year of existence in just a few weeks.
Yee Haw!!

*The Alexa Toolbar is a browser add-on which displays the ranking of any site you visit in a tiny bar graph at the top of the browser. The toolbar sends anonymous stats to the Alexa web ranking company, which in turn determine the popularity of that website. The only weird part is, only bloggers actually use that toolbar, so your Alexa rank is really a measure of how popular your site is with bloggers. But yet many people haven’t caught onto this weakness, so your Alexa rank influences your rankings in the top 100 list as well as how much you get paid for advertising spots.  If a significant number of readers could be enticed to run the toolbar… hoohoo, that would be funny. There are already blogger networks which do a good job of exploiting this loophole, although MMM is not a member of any, hence my less-good current rank.

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!

Get rich

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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.

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• 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.