I say with confidence that the majority of the so called “start an online business in [3/5/10/etc] easy steps” articles and programs will not help beginners in getting started. They will make too many mistakes and not get results fast enough to persist.

Most of these articles are just informational, but written by people with no real world experience, or very limited at best.

If you wanted to learn how to fly, who would get you there faster — a physicist or a pilot?

A physicist could give you all the information about how planes fly. Only a pilot can teach you how to fly a plane.

Credit: GoComics.com / Wiley Ink, Inc.

In my long career, I made tens of millions of dollars in online sales for companies like American Express and Aviva Insurance. I made millions for software start-ups.

Most importantly, I have made a killing for myself building, promoting, buying and selling websites.

If I could travel back in time, there are tons of things I would do differently. I have made a ridiculous amount of mistakes which looking back seemed really obvious (and stupid).

My goal in this article is to share everything I would tell my beginner self to teach him the ropes, give him the lay of the land, the mistakes that need to be avoided, and the fastest way to a stable, strong and safe income streams.

The Principles of Successful Online Businesses

Before diving into tactical things you should do (since everyone is different), I would first suggest some underlying principles that apply in all online businesses and individuals.

If you follow these principles, the tactics you use can vary significantly but still all lead toward success with your online venture.

“Quick & Dirty” vs “Slow & Steady”

Don’t get me wrong, there are a lot of quick ways to make a buck online.

The problem with them is they aren’t sustainable, and you have to constantly find new, quick ways to do things.

It ends up just being a lot more work. (Although you do learn a lot)

Long Term businesses on the other hand, become easier to run and help you develop mastery by focusing on fewer things.

They also generally scale way better; that is to say, you get more output (money) than required input (time, capital), if you are patient enough.

Some quick examples of how a short-term business and a long-term business might contrast, from my own experience.

Suppose there is a very popular game that everyone’s playing right now. You also love this game and want to build a website about it to sell advertising space, guides or anything. You build the website and it is a success! You have your top organic rankings and everyone is sharing your content on social media.

In less than a year, the game “Pokemon Go” basically died. Credit: Google Trends

However in 2 years, this game is no longer popular. Regardless that you worked so hard and your content was so good, people just aren’t interested in this game anymore. Your site dies.

Now instead of a website about a particular game, how about a website that is just about all popular games?

“Gaming” seems to a stable interest over time. Credit: Google Trends

You can reasonably assume that games will always be popular with people, and games will come and go in popularity.

It’s more work, more labor, and more cost to make a bigger site that is about all games. It’s harder to do, and it’s more competitive.

But in the long-run, if your site is successful, each new game that comes out will require less work to promote your content since the site is already popular.

If I had just stuck to some of the original sites I had, and didn’t give up because it was too hard, I could have had some monster sites by now making insane monthly income.

But alas, I didn’t think long-term.

Go Big or Go Get a Job

You don’t have to try to build the next Google, Amazon, Facebook [insert big company du jour].

But you really want to ensure you have serious upside, and your downside is as low possible.

A successful, long-term business requires a lot of work, especially to start. Probably a lot more than you work right now, if you have a full time job.

You are also not likely to make any money in your early days, or at least, less than you are making at work.

Therefore, there is already significant downside to spending your time building an online business: time you could have spent working and earning guaranteed income, while trying to build a business that, statistically, is likely to fail.

I hope that doesn’t turn you off too much, it’s required knowledge to truly grasp the contrasting point about upside.

If you have all this downside risk, you want to ensure it’s a-symmetrical with the upside.

In other words, you want your upside to be WAY bigger than your downside.

Suppose you are currently an office worker making $40,000 per year. You want to try your hand at an online business.

Since it will take you a few years, and there is a good chance you will fail, you want to make sure you upside is well over $100,000.

In fact, if this were the case, I would want a business that could generate a minimum of $1,000,000 per year, or more.

There’s no point of quitting your job to try to simply replace your working income, considering all the risk and downside.

There’s also something to be said by going for a much bigger goal.

Suppose your goal is to make $1,000,000 per year, what happens if you “only” make it to $500,000 per year?

(Insert smiley face here, lol)

You have to be intrinsically interested in your business

I make this mistake all time, even to this day.

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Sometimes there are opportunities (to a seasoned online entrepreneur) that seem too good to pass up.

Recently, I found an opportunity to sell “Rash Creams” on Amazon (yep, you heard me right)

Seems like it can make decent money for very little effort, so I went for it.

I can tell you already, I hate working on that site. I hate looking at it, I hate spending money on it.

I don’t know anything about rash creams. I definitely don’t care about them.

Sure, the site makes money. But it costs me my soul. I have to do something that I hate now.

In contrast, I have this site (the one you’re on right now)

Maybe you can tell from my writing that I know what I’m talking about. I hope it’s apparent that I am enjoying myself, too.

I don’t even consider what I do on this site “work”, I do it for fun. I look forward to waking up to work on it, and I stay up late working on it.

What happens? I have better content than people who have “Rash Creams” style websites, where they dread working on it.

Learn from Warren Buffett, do what you love and it won’t even feel like work.

Stay on the top of your game

The internet moves insanely fast.

I can tell you from personal experience, if you read a book about internet business, it’s usually out of date by the time you finish the book.

“Back in my day” (I guess I’m old now) – you needed to know HTML to build a website, and you used notepad to do it. It would take months.

Once your site was up, the only way to get traffic was to be on the Yahoo Directory (used to just be a manual human directory). There was no Google.

The average modem speed was 28.8kbps, when 56kbps came out, it blew our mindholes. We could now download a song in only 2 hours instead of 4.

Fun fact: before mp3 format we used .wav format, and a 3 minute song would be about 80mb.

Domains cost $75 a year and hosting was over $30 per month. If you were lucky, you could get 100mb of bandwidth per month.

Now, you can get a domain for $10 with unlimited bandwidth  , have WordPress installed with a free theme and get indexed by Google in a few hours. No coding required.

My point is, the landscape changes really fast, and continues to do so before our eyes.

If you want to make it as an online entrepreneur, you have to be on top of all the latest technology and tactics to reach people online, which always changes.

Imagine how different the internet was before phones and social media. Imagine how different it will be 10 years from now. (Spoiler alert: you can’t)

Online Business Principles: The 4 Principles of Success

1. Think Long Term – slow and steady wins the race
2. Go Big or Go Get a Job – ensure you have significant upside relative to your downside
3. Enjoy what you do – it shouldn’t feel like “work”
4. Stay Sharp – the internet changes quickly; you must adapt with it.

Common Attributes of all Online Businesses

Online businesses make money in infinitely different ways.

However, they all share some common attributes, which you need to understand.

Mastery over these attributes will maximize your chances of being successful.

It’s all about traffic.

All successful online businesses have traffic to their various properties (website, social profile, app etc)

Some businesses go for massive amounts of general traffic, others go for small amounts of targeted traffic.

Growing Traffic = Growing Business. Credit: Google Analytics

There are a lot of ways to get traffic, both free and paid. Depending on the nature of your business, you will need to use different methods.

Later in this article, we will discuss different ways to get traffic to your site.

The bottom line is: if you don’t have traffic, you don’t have an online business. You always need to focus on getting traffic.

Your offering needs to be valuable

This seems like a no-brainer, and as you probably know, there is a lot of garbage on the internet.

Whether it is a low-quality product, and poorly written article or a terrible user experience, these sites won’t go on to be successful.

Having a high quality offering is like throwing a snowball down a hill.

Every time someone interacts with your brand, you are more likely to get referrals, better rankings on Google and better online reviews.

They self-reinforce and make your snowball grow bigger with virtually no additional effort.

A low quality product is like rolling a snowball up a hill. It’s much more work, and you are more likely to slip and fall.

You will need to issue refunds, deal with poor customer reviews and can’t expect any referrals. Google will see this and penalize you in search rankings.

All great online businesses have something to offer to their visitors, whether it is a great product, informative content or a fun experience (hopefully all 3).

Coloring in the lines

There are a lot of sketchy ways to make money on the internet. Sometimes the legality can be “iffy” at best, especially considering that different countries and states have different laws.

For example, consider the following types of sites:

• File sharing sites – Torrents, Uploads etc
• Image Hosting Sites
• Streaming Sites, Downloading Sites
• Adult Sites

There are many people who have made fortunes in these kinds of businesses. There are also many who have been arrested, sued and thrown in jail.

Megaupload.com shut down, executives arrested

It’s obvious that these sites are illegal and you are taking a big risk by getting into these types of online business.

But consider the following types of sites:

• Fun games for kids site that has online registration
• Personal blog site where you post images from the internet
• Item review site about a popular consumer product

These sites seem perfectly legitimate, but all have legal implications that you need to know and be aware of, for example

• Laws about the handling of information about minors has additional legal considerations, even on a simple gaming site;
• All images you post on your blog may be required to have certain credits or licences;
• Companies can attempt to sue you if you write negative articles about them

There are legal implications in every business, even the most innocent and simple ones.

The key is that you are legally covered — meaning your business doesn’t carry much legal risk. You can achieve this by speaking with a lawyer who specializes in online businesses.

The 3 Key Attributes of Successful Online Businesses:

1. They have traffic
2. They have something valuable to offer
3. They are legally able to operate

The Best Online Business for Beginners

Now that you know the principles and the key attributes of successful online business, where do you start?

There are so many options to choose from, and you don’t have experience in any of them, how do you choose?

Remember our principle about enjoying what you do? Your business should be related to something you’re already interested in (or good at).

You also want to limit your downside risk, so ideally it’s not a business that requires (much) money to get started.

Therefore, I believe the best way for a complete beginner to get started is to build a content brand about something you’re interested in.

It requires less than $50 to get started, and gives you hands-on experience that will help you with your future venture.

Even if this first business fails (which it probably will), you will be much better prepared for your 2nd, 3rd (4th, 5th… 100th) attempt.

A successful content site: Simple, but Not Easy

It’s very simple to create a successful content site. All you need is:

• Amazing Content (ideally, the best available on the internet)
• A Smooth User Experience
• People Linking, Sharing and Interacting with your Content

Do these things better than your competitors, and your site will be successful.

It really is that simple. Unfortunately, it’s very hard to do.

Running a marathon is simple. You just run from point A to point B and you complete the marathon.

Just because it is simple, doesn’t mean it’s easy.

So let’s get started on how you can deliver these three core features of a successful content site.

How to make Amazing Content

By amazing content, I literally mean the best content available on the internet.

If your content isn’t the best, then you don’t deserve any traffic. Period.

Content is King

Master of your Domain

The key to making great content is to actually know what you’re talking about.

Doesn’t matter if it’s an article, a video or a PowerPoint presentation, you can only make it amazing if you understand what you’re presenting.

Listen, most information is already “out there”, if you are just passing the information along, what value are you adding?

If you truly understand a subject, not only can you explain it in a simple fashion, you can also connect it to other ideas and use narratives to make it more compelling.

You can write in a more entertaining way than a snooze-fest Wikipedia article, even if it is more “informative”.

If the reader actually remembers your content, and is compelled to share/recommend it, that adds value that Wikipedia does not.

Easy, Informative and the right length

Your content needs to be simple to understand. Your goal post should be “Could a child understand what I’m talking about?”

Of course, not all subjects are appropriate for children, but you get my point.

That means short sentences, concise statements and fun vocabulary.

The content piece needs to strike the right balance of entertaining writing, quality information and reasonable length.

If your writing is fantastic but there is no substance, it will fail.

If your information is good but it can be consumed in 1 minute or less, it will fail.

If your writing and information is good but it takes hours to consume, it will fail.

There is no easy answer to how you balance, but there are some goal posts that you want to aim for:

• A high score (60 or higher) on the Flesch Reading Ease test
• No less than 1,000 words, or 2 minutes to consume. No more than 10,000 words, or 30 minutes to consume.
• Well referenced by leading experts, academic studies and facts
• The occasional joke and fun stories

Mix up your Media

Your content should be a mix of text, imagery, audio and video.

Humans don’t all learn in the same way, so make sure you have something for everyone.

The 4 Ways Humans Learn

If at all possible, try to have develop the media yourself. Good imagery and videos are often promoted by bloggers who don’t want to create the media themselves.

A Smooth User Experience

User experience will always be relative to the time. 20 years ago, our CRT monitors had display sizes like 800×600 and there were no phones.

This was the most common screen size and resolution for a while.

Needless to say, user experience now a days has to accommodate a huge variety of screen sizes, devices and data speeds.

Your content needs to be beautiful on all devices.

The most important thing to remember is user experience is a moving target and will always have to change with the times.

You may be able to share timeless content that will be relevant in years to come, but it is all but guaranteed the expectations on user experience will change over time.

So what does that mean? Ensure you are up to speed on

• The most popular content management platforms (WordPress, Joomla, Shopify, etc)
• The most popular traffic sources (Google, Facebook, Instagram, etc)
• The latest design styles, usually by updating your theme, or purchasing new ones as they come out
• The latest devices, screen sizes and resolutions. Ensure your content can load properly on all the most popular (iPhone,  Android, PC etc)
• Appropriate load times and bandwidth for your target audience.

Human Interaction and Endorsements

Finally, if you have produced amazing content and delivered it with a smooth user experience, this part should be a natural outcome.

Google, Facebook, YouTube and other platforms know how others are interacting with your content.

Whether it is through time on page, likes/shares, up votes/down votes, they know what content is resonating.

They use these signals to inform the rankings for content on their platforms.

Google: Organic Search

While social signals (facebook likes, retweets, comments) play a role in search engine rankings, the biggest signal for Google is still a natural link from a high authority site.

When strong sites link to your content, it’s a very strong signal to Google that your site is important.

Getting good links isn’t easy, and getting bad links can be very dangerous.

Make sure to focus on solid, white-hat link building techniques. This article is a fantastic guide on the subject.

Facebook Signals & Organic Reach

Facebook promotes content that it thinks people like you might engage with.

For example, if 2 or more of your friends like the same content, it’s likely to be promoted to you.

This is the primary way that you get organic reach, when someone who follows your page likes your content, their friends might see the post.

The more people you reach, the more people you engage, the more traffic you will get. (and it will help your Google rankings).

You may ask “How do I get people to actually engage?”

Well that is covered in #1 – Create amazing content. If your content is worthy of engagement, you’ll get it.

Anything that gives you tips and tricks to dress up terrible content, you’re doing it wrong.

Charlie Munger has a great quote that I always remember:

“If you mix raisins with turds, it’s still turds.”

Colorful Charlie, gotta love him.

Wrap Up: Online Business for Beginners

You’ll notice there’s no steps, how-to or instructions on how to build a specific online business in this article.

That’s done for a reason, there is already literally millions of pages that explain that stuff.

The purpose of this article is to provide you with the guiding principles and the winning attributes of successful online business, so that you may sift through the mountains of information on the internet.

For example, if someone suggests making a Product Review site to make affiliate commissions, you know that you want to review products that have long-term futures, that you are interested in and willing to become the expert on, and that your reviews are the absolute best available on the internet.

Otherwise, don’t waste your time.

The post How to Start an Online Business: The Beginner’s Guide appeared first on BarryDeen.com.

Most investment books will not stand the test of time, they are gimmicky, empty, or simply looking at historical data and inferring (incorrectly) that these strategies will work in the future. So called “back-testing”.

Any such book is written by authors who’ve fallen victim to both the hindsight and confirmation fallacies, which is a real psychological phenomenon.

After being an investor for over 15 years and reading the popular literature, I’ve narrowed down my list of the best books on investment ever written.

The top investment books usually share common wisdom that the average investor can understand and apply.

• Focus on safety and reducing risk;
• Acknowledge the role of psychology;
• Achieve a reasonable return;
• Minimize cost;
• Buy and hold;
• High Quality Issues; and
• Simplicity.

I can say with confidence that as of 2017, if you only read these books on investing and apply their lessons, you will be miles ahead of the average investor in the long run.

The Little Book of Common Sense Investing

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John Bogle, the founder of Vanguard, makes an irrefutable case that trying to “outperform the market” is statistically highly unlikely. Since every trade is simply a buyer and a seller, that in aggregate for every winner there is a loser.

Except that most transactions also have a third party, the [broker/investment advisor/fund manager/parasite] gets paid no matter what.

This creates the effect that the best you can expect, on average, is the performance of the market, minus fees.

In addition, as time passes, the more actively you/your fund trades, the more the impact of fees have on your compounding effect.

Bogle’s solution? Buy an ETF that tracks the market performance and aims to minimize fees. (Some are as low as 0.05%. Compared with 1% and higher for many mutual funds, and 2% and higher with hedge funds)

Warren Buffett endorses not only this idea, and not only John Bogle, but Vanguard’s ETFs as well. I also agree it’s a fool’s game to try to outperform the market.

At Berkshire Hathaway’s annual shareholder meeting in 2017, Warren Buffett acknowledged John Bogle and said he “has done a great service to the American investor”.

The Intelligent Investor

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If the world’s greatest investor says this is “by far, the great book on investing ever written”, anything further I can say is redundant.

What I can say is this: The advice in this book, written in the 70s, is still just as relevant today as it was then. The lessons in this book are timeless and will always be true.

The only reason this goes below John Bogle’s book is that, in the 70s, there was no such thing a low-fee ETF. A large part of the book is describing the activities an investor would need to undertake to create their own ETF-like portfolio. (The defensive investor).

For what Graham calls “The Enterprising Investor”, he does offer a stock picking method that is proven to be able to beat the market while preserving your capital, known as value investing.

Common Stocks and Uncommon Profits

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While Warren Buffett may say that his mentor’s book “The Intelligent Investor” is the best book, it seems to me that Phil Fisher’s book “Common Stocks and Uncommon Profits” most resembles Berkshire Hathaway’s current investment philosophy.

The wisdom in this book is echoed in Charlie Munger and Warren Buffett’s most famous quotes.

While this book does advocate stock picking, I love the emphasis on the underlying business, and virtually nothing about the stock market itself.

He talks about what makes a great business and what kinds of businesses stand the test of time. Businesses that last forever (or extremely long) can be worth extremely high prices. As such, there isn’t a large emphasis on ensuring your price is a “bargain”.

Concepts such as an economic moat, an inherently good business, long term prospects and good management are all explained in detail, and it’s very easy to understand.

The Book on Rental Property Investing

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Brandon Turner’s book on rental property investing, one of the easiest to understand, and aligned with the great wisdom of top investors, is the best book a prospective real-estate investor can buy.

This book focuses on true investment, unlike the majority of real-estate books which focus on speculation. The main theme of this book is how to find undervalued properties that generate positive cash flow on the rental income, after taxes and expenses.

Since you can compare this discount cash flow to risk free assets such as treasuries, stocks and corporate bonds, you can make intelligent decisions about price.

Many other real-estate books encourage you to take out massive leverage and risk by purchasing houses, renovating them and flipping them. This of course, is speculation that someone in the future will purchase the property for more than it’s worth. Of course this can work, but it is still a speculation.

This book is very easy to understand, even a high school student could easily apply the learning (of course, they might not have the credit and income to execute).

Security Analysis

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The foremost books on understanding and valuating all types of securities, from stocks, bonds, preferred shares, convertible issues and more.

This book, written by Benjamin Graham and David Dodd is the most in depth text on the analysis and valuation of securities.

It is not an easy read; by no means should the average investor read this. If you do find that security analysis is your passion, it makes good sense to read this book. Primarily, I think many people will find that security analysis is not for everyone.

While the mathematics are not impossible, you likely do need above average skills with numbers. In addition, it’s not the most exciting line of work. You really have to have a passion for it, and if you can get through this holy grail of a book, being an enterprising investor might be right up your alley.

This book focuses primarily on value investing, but does have very relevant information for investors looking into growth companies as well.

The post The Best Investing Books Ever Written (2017 Edition) appeared first on BarryDeen.com.

Warren Buffett, Charlie Munger, Benjamin Graham, Phil Fisher, David Dodd, to name a few.

I’ve been an investor and online entrepreneur over 15 years and experienced huge bubbles and massive panics in many asset classes; from the stock market, to real estate, commodities and currencies.

I’ve read over 100 books on investing and finance and have explored many different theories and strategies: value investing, swing trading, technical analysis, short-selling, options, real-estate, lending and biographies on the wealthiest people who’ve ever lived.

Through both hands on experience and lots of reading, I’ve compiled this list of ideas that all the great investors agree on.

I am confident that if you adsorb these lessons, you will lose far less money than the average investor.

Investing is easy, except in practice.

Human psychology is what makes investing hard, not the “math” part.

Whether you buy stocks, bonds, real-estate, farms, websites or some other asset class; it actually doesn’t matter all that much.

It’s your temperament. Your emotional control. Your ability to think independently.

Do you panic in bad times? do you get greedy in good times?

This is what impacts your investment performance. Not your asset class.

You can’t just read about this stuff, you need to get your hands dirty and invest your own, real money.

Once everything is real, not only will you take investing more seriously, but you’ll be able to observe your own feelings towards the fluctuations.

When you having been saving for years or decades and you watch that “hard earned money” start to vanish, “buy and hold” doesn’t feel so easy.

Likewise when prices are rising to absurd highs, it’s not easy to start taking profits off the table.

Because of course, “What if it goes higher?”

Do not pay excessive (or any) investment fees

In case you haven’t heard, 99% of active funds underperform the market.

The biggest reason is the fees.

John Bogle in his book “The Little Book of Common Sense Investing”, he explains that since the market is just the sum of all the investors trading with each other, if fees are being taken, it makes it virtually impossible to beat the average.

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Therefore, the best strategy is to mirror the index and minimize your fees. This advice is echoed by the world’s greatest investor, Warren Buffett.

With the invention of low-cost, passive ETFs for stocks and bonds, and publicly traded REITs, there is no reason to pay fees higher than 0.10%.

If you have bought in to some adviser who claims they will beat the market, the chances are 1 in 100 that they will under-perform the index fund with low fees.

For some sobering context, the difference between earnings the same 7% per year, except with a 1.38% MER rate can be millions of dollars in a lifetime on a stock portfolio.

Credit: Casey Research: https://www.caseyresearch.com/money-forever

The only value an investment advisor can offer you is to keep you calm during a panic or keep you from making other critical mistakes.

But, for all you know, they may be right there in a panic with you.

The same is true of you, the more you trade and incur expenses, the more this takes away from your overall return.

Buy and hold is almost always the right policy.

How to Invest Money: Lesson #2 ~ Keep investment expenses to the absolute minimum.

Be Ready.

Truly great opportunities, that are right in your sweet spot, will be very rare in life.

In Malcolm Gladwell’s book “Outliers”, he makes a compelling case that success is a mix of both luck and ceasing the moment.

Bill Gates worked hard to build Microsoft. He famously said “I never took a day off in my twenties. Not one”.

Nobody can argue that Bill Gates was smart and he worked hard. But also;

His timing was lucky; for computers were in their infancy. What if he was born 30 (or 3,000) years earlier?

His circumstances were lucky, being one of the few students in the world with access to a computer. Most universities didn’t own computers.

He lived in a capitalist society where he was free to pursuit his interest and talents. What if he was born in the slums of India?

The bottom line is: Bill Gates is successful because he took advantage of his luck.

Look at any successful person, and their lucky circumstances will become clear, in addition to their hard work and good decisions.

Fish in a barrel.

In investment, the best opportunities are sharp declines in high-quality asset prices.

For example, if the S&P 500 drops 25% in a 12 month period, buying should be easy (it’s not, it’s usually downright terrifying).

It follows that the best way to capitalize on a price decline is to have sufficient cash on hand.

Cash is a bad investment, especially on paper. It is guaranteed to lose purchasing power.

So why keep it lying around?

Warren Buffett says, “I keep enough cash around so I can sleep at night”.

When you are fully invested in a declining market, the optimal strategy is to do nothing and simply wait for prices to recover.

Of course, most investors can’t do this.

They don’t have courage to do nothing (understandably) while their net worth vanishes before their eyes, and end up making big mistakes like selling near the lows (“because it might go down more”) and getting back in once prices increase (“because it’s going back up!”).

Their panic causes them to act.

That’s why having some cash on hand not only protects you from major declines, but actually makes you welcome them.

Of course, having cash is hard too when you watch the market soar. You will be tempted to get back in, especially if you check prices frequently.

By Cash, equivalents are ok too (short-term treasuries, for example)

How to Invest Money: Lesson #3 ~ Always keep cash around

Know where you’ll die, then never go there.

Warren Buffett, when asked about leverage, famously said:

“If you’re smart, you don’t need it; if you’re dumb, you have no business using it.”

Charlie Munger, the great inverter, described the three ways to financial ruin:

“Drugs, Liquor and Leverage.”

Investing is already stressful enough for the majority of investors, and leverage just makes it 2x – 3x worse than it needs to be.

In addition, when you invest rationally, you have low chances of losing any money, let alone all your money. However, when using leverage, if your assets fall low enough in price, you can be completely wiped out and be at the mercy of your creditors.

The one exception I would mention is a residential mortgage on a detached home, with a fair interest rate over a long amortization period, which is a very common form of leverage used by the general public.

Even in these instances, if your mortgage(s) are too high relative to your personal and rental income, you can be in a difficult situation if you become unemployed, or have prolonged rental vacancies or subject to sudden and substantial interest rate fluctuations.

How to Invest Money: Lesson #4 ~ Don’t Borrow to Invest. (Your home is not an investment)

Clearly understand investment vs speculating, gambling and “playing the market”

The best definition of investing I’ve read was by Benjamin Graham, the father of value investing.

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, page 18

There is nothing wrong with speculation. It’s just important that you know the difference and act accordingly.

A major component of an Investment, consistent with many of the greatest investors, is to preserve your capital.

Benjamin Graham went on to say

“The most realistic distinction between the investor and the speculator is found in their attitude toward stock market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices.”
– The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 205

Warren Buffett’s only two rules of investing are:

#1 – Don’t lose money
#2 – Don’t forget #1

Whether an asset purchase is an investment or speculation is relative to the buyer.

Imagine two “investors”, Alan the Analyst and Peter the Plumber

If Alan the Analyst, after much research, and patience, sees that a company he’s been following has come down significantly in price, Alan can intelligently make an investment in that company’s stock.

If Peter the Plumber hears from a friend that this same company would be a great investment and purchases some stock, this same transaction would be a speculation by Peter.

An investment requires: thorough analysis, promise of safety and adequate return. Everything else is speculation.

How to Invest Money: Lesson #5 ~ Stick to Investments, avoid Speculation.

Minimize Risk by Sticking to High Quality Assets

Related to speculation.

Hear about that hot new penny stock that’s gone up 300% in the last week?

How about that up-and-coming gaming app that got 500 million downloads in 1 year?

That drilling company issuing high interest bonds so it can explore for new oil fields?

Shall I continue?

The majority of common stock that qualify as both having the promise of security and adequate return will be large companies, leaders in their industry, with a long history of reasonable earnings growth.

The bonds of the above mentioned companies, may also qualify as a high quality asset. Federal bonds in developed nations are also considered to be high quality.

There is already significant systemic risk in financial markets, there is no need to amplify it.

How to Invest Money: Lesson #6 – Stick to high quality assets (margin of safety)

Should I “invest” in gold, silver and other rare metals?

By nature, a precious metal generates no return or income. Therefore any potential gain would be a speculation that someone will pay more for it in the future, usually during times of panic. Therefore, it cannot be an investment.

However, there are many instances through-out history where societies lose confidence in their paper currencies (including in the United States) and silver and gold became the most trusted medium of exchange and store of value.

It was used by great civilizations (Romans, Egyptians, Persians)  that existed longer than our modern nation-state democracies, and certainly longer than our current fiat system, which only sprung up in 1971 when Nixon suspended convertibility of the dollar it gold.

It’s important to have the right perspective on this. As long as you have high quality assets like stocks, and real-estate, those assets will still have value regardless of what medium of exchange is en vogue at the time.

Your house won’t cease to exist if people don’t like dollars, or euros or whatever. You will need to use some kind of medium to buy food from the farmer.

Holding just a small amount of physical silver or gold n your possession (say, a few pieces of jewelry, or antique coins) protects you against a possible negative black swan with currencies, but it won’t produce a return for you.

So at best, it’s an insurance plan for a very rare event.

How to invest money: Lesson #7 ~ Don’t invest in precious metals. But don’t feel too bad to have some in the forms of useful consumer goods.

How to own all the rice in the world, forever.

In ancient times, there lived a wise man who was summoned by a generous king.

The king was a big fan of his books and wanted to offer him a reward.

“Wise man, your words forever changed my life and our great kingdom. For that, I will willing to grant you any wish” The king said.

The wise man pointed to a 64 square chess board, and says to the king

“Your Majesty, thank you for your generous gift. My ask is meager. Upon that chess board, place 1 grain of rice on the first square, 2 upon the second, 4 upon the third and continue to double the grains until you reach the 64th square. That is all I ask.”

“That it is all? Surely your great wisdom is worth more than mere rice on a chess board? No diamonds or lands?” The king asked, puzzled.

“That is all. I will return in the morning to collect the rice. Thank you, my lord”.

To his shock, and silent amusement, the king was informed he committed over 536,500,000 grains of rice to the wise man, which was more rice than was available in the entire kingdom.

This is the power of compounding, and it is not intuitive for humans.

Stansberry Research did a great comparison of the effect time and consistency has on compounding.

Imagine two people, Tina the Twenty Year Old and Frank the Forty Year Old.

Tina, at age 20, has $2,000 and invests $300 per year in her investments.

Frank, at age 40, has $10,000 and invests $5,000 per year.

By age 70, who will have more money?

Tina, surprisingly, will have triple the amount, because of her 20 years of compounding. Even much bigger investments don’t make up for the time difference (compounding period).

How to Invest Money: Lesson #8 ~ Understand Compounding – Start Early, Be Consistent. 

Don’t be a dumb Bison

Native Americans historically used a technique called “The Buffalo Jump“, where they made massive amounts bison jump off a cliff to their death.

All they needed to do was get the herd moving in the cliff’s direction, and the bison would blindly follow the herd.

Needless to say, this is much easier (and safer) than hunting. Simply wait for the herd to jump off the cliff, then collect all the spoils.

In investing circles, this idea is known as contrarian investing. It means to go against the herd.

In The Intelligent Investor, The Revised Edition, Jason Zweig says

“The intelligent investor dreads a bull market, for it makes his purchases more costly.”

Most people feel good and happy when their stocks go up. But you should only be happy if you are cashing out.

Phillip A. Fisher, Author of Common Stocks and Uncommon Profits, describes the importance of being a contrarian:

“The former eager buyers of the stock become discouraged sellers. … At this point the stock might well prove a sensational buy”
– Common Stocks and Uncommon Profits, Philip Fisher, Page 93

If asset prices are falling, by definition it means there is more supply (sellers) than there is demand (buyers).

Therefore, if more people are selling (prices are falling), you want to be a buyer.

In other words, you want to do the opposite of what the herd is doing.

How to invest money: Lesson #9 ~ Don’t follow the herd.

Bringing it all together.

Hopefully this wisdom will show you that there is no “right way” when it comes to investing.

There certainly are wrong ways, though.

To re-cap the 9 timeless lessons of investing:

1. Investing is simple, except in practice. Psychology is the hard part of investing.
2. Minimize your fees: this includes MER, trading/management fees, taxes etc
3. Keep Cash (Equivalents) Plentiful: Flexibility to capitalize on good opportunities.
4. Don’t borrow to invest: It gives you a chance to go totally broke. Don’t take that chance.
5. Invest, don’t gamble: if there is no promise of safety, it’s not an investment.
6. High Quality Assets: anything else is not worth the risk
7. Don’t invest in precious metals: They don’t produce any return.
8. Compounding, the 8th wonder of the world: Time & Consistency are the keys.
9. Oppose the Herd: Try to do the opposite of what “most” people are doing, especially in extreme circumstances.

To invert these lessons, think of it this way:

1. Don’t look at stock quotes, and you can’t get psychologically impacted by prices.
2. Don’t pay investment fees.
3. Don’t fully invest in anything.
4. Don’t use leverage.
5. Don’t confuse speculation with investment
6. Don’t buy low-quality financial assets
7. Don’t buy precious metals
8. Don’t wait to invest
9. Don’t feel good when stocks go up or Feel good when they go down.

The post How to Invest Money: Timeless Advice From The Greatest Investors appeared first on BarryDeen.com.

You are lucky you came here, and not to some other website.

The fact that you are googling How to Pick Stocks, What stocks to buy, best stock picks, etc – is proof that you should not be picking stocks.

If you think it’s as easy as Googling it, you are all but guaranteed to lose money.

Let me explain.

First thing’s first – What is the stock market and what are stocks?

You may think the answers are obvious, but they are not. You can’t pick stocks until you understand the rules.

Stocks are little pieces of ownership in a business. If a company has 1,000,000 shares outstanding, and you own 100,000 of them, you own 10% of the company.

The stock market is simply a place where owners of stocks sell their pieces to buyers. Usually, there is a middle-man (your stock broker, for example) that facilities the trade between the stock picker and the stock seller, and makes a fee.

How stock prices are determined

The simplest way to think about stock prices is:

If more people want to buy stocks than sell, the stock prices goes up. If more people want to sell the stock, the price goes down.

Obviously it is more complicated than that in real life, but this is the basic premise. It simply comes down to investor sentiment.

In other words, how investors feel about the stocks they pick.

It’s important to know some of the other factors that influence a stock price, including:

• Relativity to other assets: Stocks as a whole go up when other options are less attractive (ie when interest rates on bonds are low)
• Future Expectations: The stock market, or an individual stock, can go up or down depending on how people expect the future to play out. (Spoiler alert: you can’t predict the future)
• Major events: Unpredictable events such as wars, new technology, new governments and laws can impact how people feel about stocks.
• Recent economic indicators: GDP, unemployment, inflation, interest rates are among a few of the economic indicators that investors watch closely.

But all of these things are either: impossible to predict, based on human feelings (that are fickle; they change quickly) or publicly available statistics.

Meaning, they are basically useless for picking stocks.

The basic mechanism: a stock transaction

The stock market is just a bunch of people buying and selling stocks, facilitated by investment “professionals”.

Therefore, for every stock pick there is a “winner” there is a “loser”.

Consider the following stock market that only has 2 people in it, and 1 share.

Tina buys the stock share from Tim for $5. A year later, Tim wants the share back and Tina is willing to sell it back for $10. Tim accepts this price, and buys the share back for $10.

Who are the winners and losers?

Tina won, profiting $5, at the expense of Tim.

The extra $5 came from Tim’s pocket, and the price was determined by Tim offering a price Tina found acceptable.

The entire stock market went from $5 to $10; based only on the fact that Tim was willing to pay that much for the share.

But let’s not forget the brokers

In our imaginary stock market with 2 people and 1 share, there is a critical person missing: the middle-man.

The stock picking story, more realistically, goes like this:

Tina buys the share from Tim for $5, and pays a $0.10 fee to her broker to execute the trade. A year later, Tim pays his broker $0.20 to buy the share back from Tina for $10.

Instead of the stock market being worth $10.30, which represents the money that went in, it is only worth $10, since the brokers take their fees on every transaction.

This is basically what happens when a fund manager charges a 2% MER, or you pay whatever fixed fee to your brokerage.

There is an important implication here: Every time you pick stocks and win, you win less than the other stock picker lost. Every time you lose, you lose more than the other stock picker won, since each transaction had fees.

So how do you pick stocks to beat the average of all these transactions? aka “beat the market”

The short answer is, you can’t. At least not 99.6% of active investors cannot do it.

You have two huge forces going against you: trying to predict how people will feel in the future (impossible), and trying to overcome the costs of investing.

In the long run, basically nobody has done it. The odds of beating the market are so bad you might as well go to the Casino.

Certainly you wouldn’t bring your whole net worth to the Casino, would you?

The US Stock Market has been a beast

We’ve all heard these types of stories before.

“If you had invested $1,000 in Apple in 1980, you’d be a billionaire today!”

Sure, if only my crystal ball showed me in 1999 that Apple would invent the iPod, iPhone and iPad while I still had a disc-man for my CDs.

So that’s not helpful; it’s impossible to know which companies will be a huge success, and which ones will fail.

But here is a story that would be most helpful

“If you had invested $10,000 in the S&P 500 in 1997, in 2017 you’d have $41,500.”

Substitute almost any 20 year period in US stock market history and in most instances, the gains are substantial.

So why bother trying to learn how to pick stocks so you can beat the market?

It’s already an amazing privilege to be able to capture the entire market’s return for yourself at virtually no cost!

The Average Stock Picker: A very flawed creature

I am proud to admit that the persona of the average investor is one that describes myself in my early days of investing.

I understand this creature well and can easily spot them in the wild. Many of my friends who ask me for stock picks, for example.

Smart people think they can pick stocks; since they were able to use their wits and hard work to build a surplus amount of resources available to invest, why couldn’t they do it with their stock picks, too?

Perhaps they are an above average employee (upper management) or a highly specialized professional (doctor, lawyer) or an entrepreneur.

Overconfidence killed the stock picks.

Being above average in life gives you a dangerous false sense of confidence in investing, especially with your stock picks.

The majority of stock market transactions are performed by professionals, who have risen to the top in one of the most competitive fields in capitalism and are supported by huge teams of analysts, PhDs, the most sophisticated software and the most experienced people.

And even with all those resources, they still cannot pick stocks and beat the market.

Why on earth do you think you will? Especially when your resources involve Googling stuff like “how to pick stocks”, or hearing tips from another average stock picker.

No matter how talented you are, in the stock market, you are the bottom of the food chain.

Ben Graham, the father of value investing, said this in his book “The Intelligent Investor“.

“Yet there is considerable and impressive evidence to the effect that this [obtaining superior results to the DJIA] is very hard to do, even though the qualifications of those trying it are of the highest.”

Just stick to being a great [doctor/lawyer/accountant/whatever], and leave the stock picking to the fools.

Your Biggest Flaw: Your Own Psychology

It doesn’t matter how smart you are, the decisions in investing are pretty simple. Even someone of very average intelligence can understand it.

The reason why most smart people don’t do well is they make mistakes in the moment that aren’t aligned with their simple strategy.

They also believe, because they are smart, that following something so simple can’t be optimal. Why not use all this extra brain power to learn how to pick stocks?

I think this simple cartoon illustrates the biggest mistake “smart people” make.

The #1 mistake people make in the stock market.

The problem is you got scared, you panic, especially at the wrong times. You see patterns that don’t exist, such as a continued trend up or down.

You believe things like falling prices makes it more risky, or rising prices makes it safer. (The opposite is true)

Even if on paper, you know this to be wrong, in the moment, you feel that it is true.

No matter how smart you are, it doesn’t mean you are brave enough to not only watch your whole net worth vanish before your eyes, but also buy more as prices fall because of the confidence you have in your stock picks.

Likewise, if everyone around you is “making money in the market”, it’s hard to overcome to social psychology of following them in, for fear of missing out.

In other words, the stock picking proverb “Buy Low, Sell High” might turn out to be one of the most stressful things you can attempt to do.

Your Second Biggest Flaw: You don’t know the difference between investing and speculation

This book explains it.

If your basic motive in learning how to pick stocks is to make money, chances are you are speculating.

If you make a stock pick because “it looks like it’s going up”, or, “this company is the future”, you are definitely speculating.

The most important aspects of investing are safety and adequate return.

In other words, your motive needs to be not to lose money.

Not losing money in stocks is simple, and could be easily understood by learning Benjamin Graham’s teachings.

There is nothing wrong with speculative stock picks, and you can indeed make lots of money with it.

But you can also lose, which isn’t a true investment.

The Above-Average Stock Picker doesn’t pick stocks.

If Warren Buffett and Charlie Munger, two of the most successful investors of all time, told you exactly how to get better results than average, would you listen?

How about John Bogle, founder of Vanguard, the largest investment company in the world?

I don’t know about you, but I think these gentlemen know a thing or two more than my friendly neighborhood banker. Or investment sales person. Or, some guy on the internet (me).

So don’t listen to me, listen to them: Buy a stock market index fund and never sell it.

That’s it. If you have extra savings, just buy the index fund, at any price, whenever you have extra money.

Don’t forget the “never sell it” part, that is half the battle.

If you want to know the best way to invest your money, this is it.

I don’t believe it, that’s too simple.

I know it’s hard to believe at first, but simple logic should bring you to this conclusion.

Remember our talk about fees earlier?

This Book Explains it Better

Well, index funds basically don’t have fees, at least the good ones (Vanguard, iShares etc)

Immediately, you get an edge over the average investor who does pay fees for similar products, or who tries to pick stocks and pays fees on each trade.

Dollar Cost Averaging

If you can actually pull off the feat of never selling, you at least get the benefit of sometimes buying low.

You can also never sell low, if you never sell at all.

Put simply, you eliminate possibilities of making mistakes. You can never sell low. You can sometimes buy low. And again, you basically won’t pay fees.

Another edge over the average investor.

Bonus: You will less stressed than the average investor

If you don’t care about the price of your index fund (hopefully, you even hope for prices to go down, so you can buy cheaper), all of that daily/hourly stress is completely gone. You don’t have to ever do research, follow news, deal with drops in your net worth, or any of the other negative side effects of being an active (and average) investor.

You just buy index funds when you have money. That’s it. Otherwise, there is nothing to think about.

Talk about sleeping easy.

The Best Stock Pick: Buy an Index Fund, and never sell it.

The post Stock Picks: Advice on How to Pick Stocks appeared first on BarryDeen.com.

If you ask Warren Buffett, the world’s most successful investor:

“What one book is most responsible for your success?” or “What is the single best book on investing?”

Again and again, he will say The Intelligent Investor, by his mentor, Benjamin Graham.

Benjamin Graham is known as “The Father of Value Investing”.

What is value investing?

Put simply: pay less for an asset than what it’s intrinsically worth. ie buying a nickel with a penny.

Margin of Safety & The Preservation of Capital

The central theme of The Intelligent Investor is making very safe investments.

Benjamin Graham coined this term “The Margin of Safety”.

Warren Buffett’s only two rules of investing are: 1) Don’t lose money; 2) Don’t forget rule #1.

In his entire approach to investment, The Margin of Safety is the one guiding principle that must always be met.

Investment vs. Speculation

Ben Graham differentiates the two as follows:

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, page 18 (PDF | Audiobook)

“Safety of principal” – a.k.a. Margin of Safety.

Be honest, are you obsessed with stock quotes and financial news?

If you can relate, you are speculating, not investing. Ben Graham says:

“The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 203 (PDF | Audiobook)

Why check the prices? Do you need the money right now?

“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”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 203 (PDF | Audiobook)

The more you obsess with price quotes, the more likely you are to make an irrational, emotional mistake.

Making mistakes violates the rule of The Margin of Safety.

Ben Graham’s solution?

“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 judgement”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 203 (PDF | Audiobook)

So how do you know if you are an investor or a speculator? Graham says:

“The most realistic distinction between the investor and the speculator is found in their attitude toward stock market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices.”
– The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 205 (PDF | Audiobook)

General Portfolio Policy: Stocks, Bonds and the Intelligent Investor

Through-out the book, Graham generally and repeatedly recommends maintaining a 50/50 ratio of high quality stocks and high quality bonds in most cases.

When rare opportunities present themselves, you can overweight either component. Some examples in the past have been:

There have been times when so called “risk-free” assets, such as a 10 year US treasury, paid over 14% interest while stock dividends paid less than 3%. In such an instance, you may want to consider over-weight in bonds.

During the 2008 financial crisis, the stock market was in free-fall, especially bank stocks. Even as governments were bailing out the banks, the prices remained at extremely depressed levels. In such an instance, you may want to be overweight in stocks.

Benjamin Graham does recommend maximum allocations:

“It is still true that they may choose between maintaining a simple 50-50 devision between the two components or a ratio, dependent on their judgement, varying between a minimum of 25% and a maximum of 75% of either.”
– The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 27 (PDF | Audiobook)

There is a lot of literature that shows that stocks will outperform bonds in the long-run.

So why have any bonds at all?

Graham advises maintaining a bond position for several important reasons:

“… a truly conservative investor will be satisfied with the gains shown on half his portfolio in a rising market, while in a severe decline he may derive much solace from reflecting how much better off he is than many of his more venturesome friends.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 91 (PDF | Audiobook)

“… if the investor concentrates his portfolio on common stocks he is very likely to be led astray either by exhilarating advances or by distressing declines.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 55 (PDF | Audiobook)

Credit: Jeff Parker, http://caglecartoons.com

In the extended edition, Jason Zweig quotes Gilbert and Timothy Wilson’s “Miswanting”:

• “Psychologists have shown that most of us do a very poor job of predicting today how we will feel about an emotionally charged event in the future.”
  –The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 103 (PDF | Audiobook)

Effectively, you are likely to make a mistake (such as selling at all-time lows) if your all-stock portfolio takes a huge dive, which it inevitably will at some point in the future.

It always does, and usually when you least suspect it.

Having some level of bonds both protects you psychologically and provides a margin of safety.

When you buy more stocks after they have fallen in price (to maintain your bond/stock allocation) your average cost goes down as well.

The Intelligent Investor is an Owner of a Business

Graham explains that buying a stock is like buying a little piece of a real business. Each share is a claim on the equity and profits of the company.

It is not a magical electronic ticker that just fluctuates in price all day for you to look at. (Sorry, “Technical Analysts”)

The underlying business, which has an intrinsic value, should determine what price you should pay for it.

When you pay less than what it’s worth, you are protected by a margin of safety.

Of course, even the best companies can make terrible investments if you pay too high a price. More on this later.

Likewise, a bad company can make a great investment if you pay a low enough price.

Buffett compares this to a cigar butt. It’s gross, wet, you will throw it away; but it’s free and has puffs left.

Business Valuations vs Stock-Market Valuations

Suppose you own 100% of a private company that has $100 in the bank and $50 in debt. If you looked at your net worth, you’d likely say that your company is worth $50.

Now suppose your company is traded on the stock market, and the market cap of your company is $500 and you own 100% of the shares. In other words, the market thinks your company is currently worth $500.

What is your net worth now?

Graham argues that the best way to think about the value is to use the tangible equity of the company in proportion to your ownership share to determine the true value of your net worth. He says:

“On the one hand his position is analogous to that of a minority shareholder or silent partners in a private business. Here his results are entirely dependent on the profits of the enterprise or on a change in the underlying value of its assets. He would usually determine the value of such a private-business interest by calculating his share of net worth as shown in the most recent balance sheet.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 197 (PDF | Audiobook)

Looking at balance sheet value provides a margin of safety against the opinions and misjudgements of Mr. Market.

How Stocks are Priced: The Manic & Bi-Polar “Mr. Market”

Imagine you own a bakery.

An honorable baker, you have been in the business for 20 years and you know what your bakery is worth.

Every day, a man named “Mr. Market” walks into your shop and offers to buy your bakery.

He usually offers a reasonable price, but you don’t really need the money.

It’s not like you’d be better off buying a tech company or a bank or a retailer.

Baking is what you know. You politely decline Mr. Market’s offer to buy your bakery.

Take this a step further.

Some days Mr. Market get extremely scared about little things. He thinks that all bakeries are bound for bankruptcy and will become instinct.

Maybe the price of wheat is going up and fewer people are buying bread. A popular fad diet says bread causes obesity, or people are scared of gluten. Whatever.

These are all things that you, a baker of 20 years, have seen many times before.

When he panics, his offers to buy your bakery will be laughably low.

Obviously you wouldn’t sell to him when he offers the worst possible price.

In fact, maybe you should buy some of the other bakeries, since he’s offering a great price on them, too.

The flip side is true too.

On same days, he becomes so excited about baking.

Maybe new research shows that a loaf of bread per day prevents cancer. Maybe the yields on a new GMO form of wheat is forecasting increased profits by 50%, whatever.

He might even offer you over 100 years worth of annual profits!

When his blind-optimism and greed make him offer nearly any price, it’s time to sell.

This analogy perfectly describes what the stock market is.

It’s a herd of people, in once voice, offering prices for businesses. That is how stock prices are determined.

You wouldn’t let Mr. Market determine how you feel, or what your bakery is actually worth.

In fact, he’s just begging for you to take advantage of his mistakes.

You use him to buy businesses that you understand when he offers a cheap price, and sell to him when he is too excited about the future and is willing to pay insanely high prices.

The Defensive Investor vs. The Enterprising Investor

What is a defensive investor?

Graham describes the defensive investor as:

“One [who] is interested chiefly in safety plus freedom from bother.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, page 22 (PDF | Audiobook)

Chiefly in Safety. a.k.a. Margin of Safety.

In Chapter 14, “Stock Selection for the Defensive Investor”, Graham prophetically describes the structure of one of the greatest products for investors, the passive index fund.

In his time, these products weren’t available, so a defensive investor would have had to build it manually.

Basically, he describes the criteria used for an ETF such as the Vanguard S&P 500 or Vanguard Dividend Appreciation ETF.

When describing bonds, he generally a portfolio similar to the Vanguard Total Bond Market ETF.

(It doesn’t have to be Vanguard, just ensure they are reputable and have the lowest expense ratio possible)

Both Warren Buffett and Jason Zweig agree that, for a defensive investor, index-funds are the way to go. They recommend them to their own friends and family.

The majority of people would be very wise to be defensive investors, as more than 99% of active funds aren’t able to beat the market index in the long-run.

But even if you don’t try to beat the market, the average investor won’t even come close.

In fact, the average investor does significantly worse than the index for a few reasons:

• Paying high fees
• Paying more taxes
• Poor timing
• Making emotional and irrational decisions
• Acting way too frequently
• Overly complex decision making

If you approach your investment portfolio policy to contain 50% bonds and 50% stocks, then once per year you can re-balance your ETF allocation. This both gives you something to do, and automatically creates a relative “buy low, sell high” habit.

If you don’t plan to make investing your full time job, you are much better off focusing your energy on improving your personal earning power and savings habits, as opposed to trying to get excessive investment returns.

The Enterprising Investor

Graham repeatedly mentions that most people would be better suited as defensive investors, as opposed to enterprising investors.

In fact, I interpret his book almost as an argument against being an enterprising investor.

I agree very strongly with this and also wrote an essay on why you shouldn’t be a stock picker.

Sir Isaac Newton, lost the equivalent of $3,000,000 on his shares in the South Sea Company in 1720.

He famously said he “could calculate the motions of the heavenly bodies, but not the madness of the people.”

Do you have a better chance than Newton?

In “The Intelligent Investor”, Benjamin Graham says the following:

• “As for the aggressive investor, perhaps only a small minority of them would have the type of temperament needed to limit themselves so severely to only a relatively small part of the world of securities.”
• “For indeed, the investor’s chief problem – and even his worst enemy – is likely to be himself.” – Page 8
• “… the proportion of smart people who try this [beating the averages] and fail is surprisingly large” – Page 9
• “… for there is strong evidence that their [investment managers] calculated forecasts have been somewhat less reliable than the simple tossing of a coin” – Page 10
• “It is no difficult trick to bring a great deal of energy, study, and native ability into Wall Street and to end up with losses instead of profits” – Page 29

However, if security analysis is your passion, he offers his proven strategy to out-perform the market, known as “The Enterprising Investor”.

Rules of Stock Picking for the Enterprising Investor

In “The Intelligent Investor”, Graham outlines many principles to follow when selecting investments that can beat the averages. However, it was written in a general fashion and should be coupled by reading his more in-depth text, Security Analysis.

Temperament: It’s not about how smart you are

“We have seen much more money made and kept by ordinary people who were temperamentally well suited for the investment process than by those who lacked this quality, even though they had an extensive knowledge of finance, accounting, and stock-market lore”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 8 (PDF | Audiobook)

Most people find investing very stressful and emotional. You will have to endure:

• Watch a significant part of your net worth drop on a frequent basis;
• Be willing to invest more as the value continues to drop;
• Be willing to wait on the sidelines while everyone is “making money” (on paper);
• Buy boring and unpopular stocks while high tech and growth stocks are skyrocketing.

These ideas are simple in theory, but nearly impossible in practice.

Just ask anyone who was invested in stocks in 1998-2001, 2008-2009 (or October 1987).

No matter how smart you are, that doesn’t translate into being emotionally rational in highly stressful situations.

Buying Near Tangible Asset Value

This is an extension of the idea of a “Margin of Safety”.

Suppose a simple company has $200 in current assets, and $100 in total liabilities, with shareholder equity of $100.

If you could buy this company for $50, you could shut down the company, pay off the liabilities and have $100 in equity left over for yourself.

Obviously, your investment of $50 was virtually risk free. This is the idea behind a cigar butt.

“The type of bargain issue that can be most readily identified is a common stock that sells for less than the company’s net working capital alone, after deducting all prior obligations.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 169 (PDF | Audiobook)

In this instance, “net working capital” is: current assets minus total liabilities.

These types of bargains in high quality stocks are very rare, but during times of great distress, fear and panic (the great depression, and in the 2007-2008 panic) these prices became available.

When you see a headline like this, party like it’s 1999. (as in, buy like crazy, like 1999)

But even if these insanely low prices aren’t available, good deals are still available. Graham says:

“It might be best for him to concentrate on issues selling at reasonable close approximation to their tangible asset value — say, not at more than one-third above that figure”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 199

High Price = High Risk. Low Price = Low Risk

When peanut butter goes on sale, we buy more and stock up for the future.

How come we don’t do the same with stocks?

We incorrectly believe that falling prices mean it’s a riskier bet. Benjamin Graham argues that the opposite is true.

As long as the underlying company is high quality and has a solid track record of stable earnings and dividend payments, you should welcome price drops as opportunities to buy.

In other words, a lower price provides a greater Margin of Safety.

The inverse is true too: the higher the stock prices climb, the more we want to buy in. Oops.

“The more enthusiastic the public grows about it, and the faster its advance as compared with the actual growth in its earnings, the riskier a proposition it becomes”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 160 (PDF | Audiobook)

Once again, we get this wrong. When stock prices are climbing, that is time to start selling small amounts of your position and deploy the cash to other undervalued holdings.

His view on bull markets:

“Nearly all he bull markets had a number of well-defined characteristics in common, such as (1) a historically high price level, (2) high price/earnings ratios, (3) low dividend yields as against bond yields, (4) much speculation on margin, and (5) many offerings of new common-stock issues of poor quality.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 193 (PDF | Audiobook)

Must Be Contrarian and Buy Unpopular Stocks

When there are more buyers than there are sellers, stock prices go up. Then there are more sellers than buyers, prices go down. (simplified idea).

“If we assume that is is the habit of the market to overvalue common stocks which have been showing excellent growth or are glamorous for some other reason, it is logical to expect that it will undervalue — relatively, at least —  companies that are out of favor because of unsatisfactory developments of a temporary nature.”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 163 (PDF | Audiobook)

To be contrarian, you should be buying when most people are selling (when prices are falling). Luckily you don’t ever have to sell, especially when you are buying great companies.

Graham says that markets will be quite mistaken and blow negative setbacks way out of proportion.

“The market is fond of making mountains out of molehills and exaggerating ordinary vicissitudes into major setbacks”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 166 (PDF | Audiobook)

The Intelligent Investor and Growth Stocks

As a general rule, Graham advises against buying “high flying” growth stocks sine they inherently violate the idea of the Margin of Safety. He says:

“For the more dependent the valuation becomes on anticipations of the future — and the less it is tied to a figure demonstrated by past performance — the more vulnerable it becomes to possible miscalculation and serious error”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 282 (PDF | Audiobook)

In other words, what happens if the future doesn’t go according to plan?

If the future high expectations don’t come to fruition, the price will likely crash, since they are already baked into the price.

So how much should you pay for a growth company? On one hand, Ben Graham offers this simple equation for a rough estimation of value:

Value = Current (Normal) Earnings * (8.5 plus twice the expected annual growth rate)

But he then goes on to say, which is consistent with the Margin of Safety:

“There is really no way of valuing a high-growth company (with an expected rate above, say, 8% annually), in which the analyst can make realistic assumptions of both the proper multiplier for the current earnings and the expectable multiplier for the future earnings”
–The Intelligent Investor, Benjamin Graham, The Revised Edition, Page 297 (PDF | Audiobook)

The Intelligent Investor: My High-Level Summary & Review

View on Amazon

There are 7 high-level take-aways of this book:

• Margin of Safety: Don’t lose money above all else.
• Temperament: Don’t panic, don’t buy the hype, don’t envy “growth stocks”.
• Value and Price are different: You want to get more than what you paid for.
• The market is your servant: don’t let it stress you out, just use it for opportunity.
• Focus on quality: Top companies with long track records for most investors.
• Ensure you always have a mix of stocks and bonds.
• High-Quality stocks become riskier when the price goes up, and safer when the price goes down.
• Be Contrarian: Buy stocks when they become out of favor for temporary reasons.

There are no alternatives other than pure respect when discussing this book.

Written in 1973, it’s teachings still hold true; as demonstrated when Warren Buffett famously avoided serious loss during the dot-com bubble.

The book is easy to understand for any average Joe who is interested in investing.

It’s also important to understand that this is one, very well defined investing strategy, known as value investing. Of course, there are many other methods to invest successfully, and this is by no means the “only” way to invest.

That said, every investor owes it to themselves to read this book and make an informed decision not to pursuit this strategy.

“The Intelligent Investor” by Benjamin Graham is featured on my list of “The Best Books on Investing ever Written“.

The post “The Intelligent Investor” by Benjamin Graham appeared first on BarryDeen.com.

The post Isaac Newton on the Stock Market appeared first on BarryDeen.com.

Let’s talk about flipping websites.

If you’re looking to buy or sell a website, read on if you want to make some serious coin.

Why do people buy and sell websites?

There are many valid reasons why someone may want to sell a great a website.

• They enjoy creating, but not maintaining websites.
• They have too many sites and can’t maintain all of them.
• They don’t have the skills or funds to grow the site.
• They are looking to do something new.
• They need cash to invest in another venture, or major life event.

For buyers, the same types of scenarios are common.

• They enjoy creating new content.
• They enjoy growing traffic and marketing.
• They have the skills to grow and improve the site. (Neil Patel and Backlinko.com Readers, for example)
• Looking to buy something new.
• They have cash they’d like to invest in a new venture.

You get the idea.

And this market is huge, and growing at a rapid clip.

Where can I buy or sell websites?

The most popular website marketplace is Flippa.

Flippa is a marketplace for websites, domains and mobile apps.

If you are a total beginner at flipping websites, you should start on Flippa.

The other major website marketplace is Empire Flippers.

Empire Flippers is a premium only marketplace. They’ll have less than 100 listings and prices starting at $15,000.00.

All listings details are verified by the Empire Flippers integrity team.

The Complete Buyer’s Guide to Buying and Selling Websites

If you are only interested in the Seller’s Guide to Selling websites, click here to scroll down.

I’ll forgive you if you plan to read it later, but you’ll need to know this basic ratio:

Price-to-Earnings Ratio (P/E): The total price you pay relative to the annual income (earnings) of the website.

Example: Suppose you buy a website for $1,000 that makes $100 per year. The P/E ratio would be 10 ($1,000 / $100).

In other words, it would take 10 years to break even, assuming earnings stay the same.

Always calculate the P/E when considering buying a website.

Later in this guide, we’ll talk about price ranges and fair P/E ratios.

Stick with what you know

Warren Buffett often talks about “The Circle of Competence“.

As he so eloquently puts it, “I’m smart in spots, and I stay around those spots”.

This timeless advice from a man who doesn’t have a computer at work applies when buying websites online.

If you hate sports, you shouldn’t buy a sports website.

If you don’t know French, don’t buy a French site.

And so on. Even if you think it’s a great deal.

No Called Strikes

In baseball, you have to swing when the pitcher throws in the strike-zone.

When buying websites, you can browse the marketplace every day and never place a bid.

In fact, not bidding is usually the best decision you can make.

It’s not easy to be patient. I know, I still struggle with impatience to this day.

You may have to wait a month, a year, maybe even longer.

But when that perfect website comes along, you’ll be so happy you waited.

Analyzing a site before bidding

So, you found a site that might be in your sweet spot, now what?

Before you start bidding, you’ll want to do a few routine checks.

“Verified Traffic”

Most established websites on Flippa and Empire Flippers will have Verified Traffic Analytics.

In other words, stats that came directly from Google Analytics.

Flippa’s interface for displaying verified traffic.

Many sellers will also gladly provide you with direct access to Google Analytics, if requested.

But, be careful with so-called “verified traffic”.

Traffic can be “spoofed”. There are bots that can trick Google Analytics into thinking the traffic is coming from Organic Search, Social, anywhere they want, really.

Direct traffic is usually bad. Direct traffic in most instances is indication of fake or very low quality traffic.

Referral traffic needs a closer look. Not all referral traffic is equal. We need to dive into which exact domains are sending traffic.

The good news is, there are free tools to help you verify the “verified” analytics.

SimilarWeb is an awesome tool. I use it everyday. Download their chrome extension for free.

Similarweb’s chrome extension interface

SEMRush is a great tool for analyzing organic search traffic. It shows you all the keywords a domain ranks for and estimates the traffic.

Use SEMRush to verify Organic traffic claims

Facebook / Twitter: If the site has social profiles, look closely at the post engagement metrics. Likes, Retweets, Comments. Lots of followers doesn’t always translate to website traffic.

If after using all these tools, the traffic appears to be valid, you can move onto the next step of analysis.

Backlink Profile

Backlinks are a huge driver of organic search engine rankings.

If you have strong backlinks, you can quickly rise in Google search.

If you have spammy backlinks, you can quickly be removed from Google.

The best tool you can use to find information about a backlink profile of a website is Majestic.com.

There are four common types of backlinks a website will have:

High Value Links are do-follow links from sites with high Trust Flow (25 or more)

Low Value Links are do-follow links from sites with average Trust Flow (10-24)

PBN Links are do-follow links from sites that were created for the sole purpose of linking out. PBNs are discussed later in this article.

Spam Links are links on sites with Trust Flow of 10 or less. They provide very little value, and in some instances can hurt your search engine rankings.

If you ever wondered what kind of links you get on Fiverr or other cheap services, now you know.

Ideally, you want a mix of high and low value links.

PBN links work for many people and hurts many others, use them at your own risk. There is an art to running a PBN.

Synergies with your existing website portfolio

There’s a reason why companies love mergers and acquisitions.

It’s called economies of scale.

In simple terms, the bigger you are, the easier it is to make profit.

If you are just starting out, this is an important concept in building a website portfolio.

Here are some obvious examples of economies of scale:

1. Social Profiles: If both sites have social profiles that should attract similar types of audiences, you can instantly increase your total reach of both sites by acquiring social profiles. This can help you increase both traffic and the fan base of both sites.
2. Hosting: If you already have a VPS or Dedicated Server, it’s likely you can absorb another site without increasing your cost of hosting.
3. Backlinks: If two or more sites are related and all have strong domain authority, they can link to each other to improve the SEO rankings of all sites. If you do plan to leverage backlinks on both sites, do ensure they are all hosted by different companies and are on different IP subnets. It is worth the cost.
4. Direct Advertising: If between all your sites have you significant reach, you will have more leverage with direct advertisers to secure pre-paid sales of your impression inventory. Reputable advertisers like to purchase impressions in large quantities, so having a large quantity of impressions will help you attract buyers.
5. Increased CPA Payouts: Many CPA / affiliate deals will pay an increasing revenue share based on volume. Having two or more related sites that are selling the same product can help you increase your overall sales and reach the higher revenue share tiers.

Whenever you are purchasing a website, it’s important to frame the purchase in the context of your overall portfolio.

Opportunities to improve the site

Remember our little talk about sticking with what you know? This is where the value really shows itself.

If you are able to personally direct the continued creation of high-quality content through your own expert knowledge, or improve the SEO, Design or user experience, you can invest your time to increase the intrinsic value of the website you’ve purchased.

This is a highly attractive aspect of analyzing a site, especially for those who are limited budgets or are making their very first website purchase.

Seller Feedback

Seller feedback is somewhat important, but the types of transactions are the main thing you want to be on the look for. A seller may have bought 3-4 websites for very low prices, and then attempt to sell a large site for which all their feedback has no bearing.

$242.000 in Transactions on Flippa.

In general, if you see somebody claiming they have been scammed, you’ll want to avoid that seller at all costs. This should be obvious.

In general though, you shouldn’t place too much emphasis on the seller and their profile, the majority of your analysis should be the website and related assets.

Buy the site or build from scratch?

There are some ethical considerations to this question.

If a seller has listed sensitive information about the operation of their business, is it ethical to leverage it to try to compete with them?

I will not get into the ethics of this question, but I will say with certainty that people are doing this.

And I think it is a fair question whether you use their “sensitive” information or not to form your decision.

If you are an experienced webmaster, often times it will be less expensive for you to build a new site and try to compete than it will be to purchase the site outright, especially for smaller sites with low traffic.

Even if you are a complete beginner, using my guide to building a profitable business from scratch, you can start a website for virtually no cost and start getting traffic within 30 days.

Forming Your Price Range / Budget

After all of these considerations, you’ll want to have a price in your mind on what the site is worth to you. This will be different and there is no correct answer, either way.

However, there are some rules of thumb that you want to follow when it comes to thinking about a fair price:

• Traffic Sources: a highly diversified traffic source profile from organic sources (search, social profiles, email list) you should expect to pay a higher P/E since there is less risk of traffic suddenly falling
• Monetization: sites that generate income from Ad Networks like AdSense, Adbuff and Taboola will cost more than sites who are making affiliate deals or direct sales, as this income is considered more stable.
• Expenses: sites that require more on-going expenses (high hosting costs or advertising costs) will cost less than those with virtually no expenses, even if the profits are the same.

Here is the multiple spectrum I kind of use in my head to determine what P/E multiple I’m willing to pay.

Assuming all these things check-out and you’re able to bid and win the listing, now comes the due diligence and contract, an equally important part of the transaction.

Funding Escrow

Once you’ve won an auction or bought a website outright, the first thing you must do as a buyer is deposit the purchase amount in escrow. Don’t worry, your money is totally safe if something doesn’t check out in your due diligence. But no seller will give away their passwords without indication that you’re a serious buyer.

Once payment is stored, the transfer can commence

Under no circumstances whatsoever should you pay the seller directly before getting control of all the assets. Escrow fees are worth the protection.

Due Diligence and Contract for a website purchase

Every time you purchase a website, you should insist upon a contract being signed by the seller. I have a sample one you can use, but it’s important to customize it based on the particulars of the website.

The main points you want to cover in a basic contract are:

• List all the assets that are included in the sale: domain, social, email, databases, intellectual property etc
• List the criteria that would need to be met for you to release the funds to the seller, for example a functional site with daily income between x & y of what was expected
• Any non-compete terms, if any
• Who will handle the migration and what is the timeframe
• How much post-sale support will be available
• What warranties are available against defects in the code found after the fact
• Any licenceing considerations if there are third party scripts or libraries

The reality is, for smaller transactions, enforcing a contract would often cost more than the site itself was worth. The point is the contract is not necessarily to use in court, it’s more to ensure both the buyer and the seller are on the same page about how the transaction will work. This is simply good business to not have any assumptions and get it all clearly written.

While you are going back and forth on the contract, you can also begin your due diligence as it relates to the operations of the website and the verification of all claims.

Verifying revenue claims

The first and most important thing to verify is the revenue claim.

You will want all of this to happen via a live screenshare. Skype is perfectly acceptable, and you should be able to watch the seller login and navigate around on the pages, perhaps on PayPal, AdSense or Amazon associates. Screenshots are never acceptable as a form of verification.

AdSense Verification

There are a few areas you’ll want to see during a live verification of AdSense earnings.

• Payments: All AdSense reports are just estimated earnings. AdSense nearly always makes deductions at the end of the month to the payments that aren’t reflected in all the other reports. Ensure you verify the payments closely match the estimated earnings. If you see large deductions for invalid traffic, you should back out of the deal.
  

  Look at the payment transactions to confirm the invalid traffic

• URL Channel: You want to clearly see that all the income that was claimed is for the specific domain. AdSense allows you to monetize unlimited sites, so you want to ensure the claims are at a domain level, not an account level.
  

  Notice the filter contains a domain name.

• Pageviews match Analytics: You should still have access to Google Analytics from your analysis. You want to compare the pageviews in Google Analytics to the pageviews in AdSense. They don’t need to be 100% perfect, but at least 80% in-line, ideally 90%+.

Often times as well, the seller will allow you to put your AdSense codes on the site for 24-48 hours so you can verify the daily income is in-line with expectations.

eCommerce Verification

The three most common eCommerce platforms you will encounter are Shopify, WooCommerce and Amazon FBA.

Common payment processors you’ll run into are PayPal, Stipe, Payoneer, Skrill and a few others.

Here are some of the most common things you need to look for on all platforms

• All orders have a corresponding transaction in the payment processor.
• All orders have a customer name and contact details.
• Any refund reports or reversals
• For physical goods, records of the shipments / tracking numbers.
• For drop shippers, records of orders and invoices for physical goods

Amazon Associates Verification

Amazon Associates is very straight forward to verify. So long as the traffic sources check-out, you’ll just want to verify two things:

1. The products ordered on Amazon match the products being promoted on the site, and;
2. Amazon successfully issued the payments to the seller

If all the revenue claims seem to check out, there are still a few quick checks you’ll want to make.

Search Console Verification

Especially if the site derives a significant amount of traffic from organic search, you’ll want to check a few things on Google Search Console:

• Manual Actions – this tab in Google Search console will alert you if any penalties have been applied to the domain
• Search Analytics – the daily traffic here should match what is in Google Analytics. If there is a major discrepancy, it could indicate spoofed traffic.

Backlinks and PBNs

There’s generally nothing wrong with purchasing a site that has established links. It’s important to get full transparency about whether or not these are paid, are part of a PBN, and if the PBN is included in the sale.

The most important thing, especially if the site has strong rankings, is to ensure you are able to maintain the backlinks. If they are paid lin

ks, establish contact with the vendor / site owners and ensure the links will stay up.

Whenever possible, you should attempt to purchase the PBN from the seller.

Migration

The responsibility of who will handle the migration is usually displayed in a website listing. You should do your best to find listings where migration is included in the sale, but it’s not always possible.

The most common and simple ways to migrate a site are:

1. Ask your hosting provider – many hosting providers will provide free migrations if you are purchasing a new account, even the cheap shared accounts.
2. cPanel restorations – if the site runs on Apache/PHP/MySQL (WordPress, Joomla, Drupal etc), you can do a complete backup of the cpanel account and restore on your own hosting.
3. FTP & MySQL Import – with access to FTP, you can download all the files on to your local PC and re-upload them to your hosting provider. You’ll also need to download a MySQL export with phpmyadmin and import it into your database.

Leaving Feedback

Hopefully your transaction went well and you worked with a great seller. Be sure to leave honest feedback about how the transaction went for future buyers and sellers.

The Complete Seller’s Guide to Selling Websites

If you made it this far, congratulations! You are now ready to learn how to sell your website and get the best possible price.

Before we dive into mechanics, there are some guiding principles I’d like you to consider.

Don’t trade reputation for money

You have your whole life to make money, but a major blow to your reputation can follow you far into the future. Always be honest and fully transparent with everyone you deal with.

If there are problems with your sites and you just want to unload it, just disclose all the problems with the site. There are plenty of buyers who will be interested in trying to fix all the problems, as long as they pay a fair price.

Picking a marketplace

Just to get it out of the way, don’t even consider FreeMarket or Digitalpoint. More times than not, you will just be wasting time with scammers. If this changes in the future, I will update this article.

When to sell your site on Empire Flippers

You should list your site on Empire Flippers if your site meets the following criteria:

• Generate over $1,500 USD in profit per month
• You monetize with AdSense, Amazon Associates or eCommerce.
• You are not in a rush to sell

In general, Empire Flippers will get you a better price for your site than Flippa.

Selling your website on Flippa

There are many aspects to finding the perfect buyer and getting a great price when selling your website on Flippa.

Building your profile

Flippa has many features to help build trust with your profile. You should work towards all the verifications possible, such as sending in your identification to Flippa’s marketplace integrity team.

It’s also ideal to have feedback on your profile before your first listing goes up. Purchase a few cheap sites for under $20 just to get the 100% badge on your profile.

Writing a comprehensive description

A detailed and fully transparent description of your listing will help attract and convert visitors to watchers and bidders. I’ve provided a template I’ve used to sell over $67,000 on Flippa alone, or you can use our handy questionnaire to generate one tailored to your specific site.

Verifying all your data

Flippa has a Google AdSense and Google Analytics verification system built into their listings. Take advantage of this feature as it adds a strong layer of credibility to your listing.

Managing & Responding to Comments

It’s important to respond to all legimitate questions in a timely fashion. If one potential buyer is thinking it, it’s likely many are. Be as honest and detailed as possible.

You will however, get a lot of inappropriate comments as well. Some buyers may draw incorrect conclusions and smear them all over your listing. It’s ok to delete a comment as long as you respond and provide a reason.

Responding to all intelligent questions

As with the comments, some of the questions you get aren’t worth a response. Don’t feel the need to respond to silly questions.

Any legitamite question should be responded to promptly and thoroughly.

Communicating with bidders

Whenever someone bids on your listing, you should send the a message as soon as possible letting them know you are available to answer any questions they may have. You can be proactive and grant them access to Google Analytics while the auction is active.

When the auction is coming to a close (perhaps with 24 hours left), you should message anyone who has bid and anyone who has asked you a question, in both comments and private message.

Remind them why this site is great and if they had any final questions or concerns.

The final hour of a website auction

Anytime a bid is made in the final hour of an auction, the auction is extended to 60 minutes.

The final hour is also when the true bidding war, if any, will take place.

Ensure you are near your phone to respond to any final questions that come to you in the final hour.

If a bidding war is taking place, you may want to consider setting a Buy it Now price.

Setting a Buy It Now Price

What price you choose should be a multiple of the current bid. I have seen success in doubling the current bid in the final hour and having one of the bidders end the auction with Buy it Now.

As long as you are happy with the current bid of the auction, go for it and set a high Buy it Now price.

Wait for escrow, no exceptions

When the listing closes, you should immediately message the winning bidder and congratulate them on their purchase.

Let them know if they have any questions about the escrow process and if they’d like to prepare a sale agreement.

It’s always a good idea to have a sale agreement, however, the ball is in the buyer’s court.

Under no circumstances should you transfer any assets or grant any passwords to the buyer until you can confirm the escrow account is funded.

When escrow is fully funded

Once the escrow account is funded, you are safe to start transferring assets over the the buyer, which could include granting usernames and passwords for the site and the back-end and starting the domain transfer.

If you have agreed to handle the migration, you should complete it as soon as possible.

You should also be proactive and offer a screen share of all the revenue claims you made in the listing.

What to document during the transfer and migration process

It’s important to record everything you transfer during this process, ideally by recording your screen with Camtasia, at minimum taking screenshots of every asset transfer.

If the buyer attempts to back-out after you have transferred the assets, this documentation will be critical for the escrow company to side in your favour.

Post Sale Support

Whether you agreed to it in writing or not, you should assist the buyer to a reasonable degree after the sale has taken place. It should be your goal to ensure that all buyers are successful with their purchase.

Leaving Feedback

If the buyer has released the payment, you should be inclined to leave positive feedback for them. Be sure to include information like how quickly they funded escrow, how long the sale agreement process took and how responsive they were when they needed to take an action.

If you follow this guide to buy and sell websites, you will be sure to find success and avoid scams on Flippa and Empire Flippers.

The post How to Buy and Sell Websites Safely and Profitably appeared first on BarryDeen.com.