"The Millionaire Next Door"

What does a rich person look like? What is their lifestyle? From what we see on TV on shows like MTV's "Cribs", they drive outrageous luxury cars by Rolls Royce or Lamborghini, wear expensive Italian suits and live in over-the-top multi-million dollar mansions. That is true for some people, but assuming that all wealthy people live that way is incorrect. They often don't drive luxury cars, they don't always buy $25,000 fancy Rolex watches or have closets full of Armani suits. They have basic credit cards like Visa, Master Card, Sears and JC Penney. They are rich because they are frugal. They stay rich because they are smart with money.

These topics are covered in a book called "The Millionaire Next Door: The Surprising Secrets of America's Wealthy" by Thomas Stanley and William Danko.

There is a phrase that says "The rich get richer and the poor get poorer." This happens since the rich know how to put their money to work for them. They spend time studying personal finance and accounting. They read publications like Forbes magazine and The Wall Street Journal. They know to avoid the pitfalls that lead to financial ruin such as accumulating too much debt. They stay away from wasteful spending like rent-to-own stores, playing the lottery and falling for fraudulent investing schemes. Are there exceptions to the rule? Yes, there are many. Often the rich get greedy and take foolish risks in order to multiply their wealth. Look no further than the likes of Bernie Madoff or the crooked bankers behind the 2008 housing crisis.

Those who have inherited money tend to be show-offs more often, buying expensive possessions, when compared with those who have earned their wealth. Earning something makes you enjoy it rather than having it handed to you with no work involved.

You can't judge a book by its cover. Spotting a truly wealthy person is not as easy as you might think.

Apple Stock is Now Much More Affordable

Due to a 7-for-1 stock split, Apple (AAPL) is now under $100 per share. Last Friday it was $645. If you want volatility, this may be a good buy. The beta is 0.74, so it goes up and down frequently. Steve Jobs' innovations like the i-pod, i-pad and i-phone have made Apple the go-to tech company with fiercely loyal followers. The stock has been amazingly successful, rivaled only by another tech stock, Google (GOOG). The 52-week range has been between $55 and $95 per share so one can get in and get out and make a tidy profit, or hold onto it for the long haul. The stock scouter rating on msn.com gives this a 10 out of 10. The chart above shows the monumental rise of Apple since 1992, and it is nothing short of amazing. In 2007 it was $100 per share and it has shot up to over $600 since then. A plus for investors is the fact that this stock gives a good dividend too, of 13.16 and a yield of 2%. As of 9/28/13 the total assets are $207 billion and the total liabilities are $83 billion, so the debt load for this company is not too high. Investing in a company that is drowning in debt is not a good move. Looking at the amount of debt compared to assets is a key indicator of whether or not a stock is a good investment. Debt can sabotage monetary success, whether we are talking about a business, or personal finance. Many will be interested in buying this stock at a "bargain" price. At over $600 per share, it was out of reach for many. Google stock is currently $555 per share. Will they follow suit and also exercise a stock split to make their stock more affordable? Information on the implications for Apple shareholders who exercise options can be found here.

Millionaire's Top Investing Mistakes

Building wealth is not easy. Make the right decisions and it can be done. The rich make good decisions more than they make bad decisions, but they are not perfect. Unless money is inherited, becoming wealthy is about hard work and researching how to make your money work for you. I contend it is not about having a big salary. Over and over, the rich become poor due to bad decisions. Those with a modest salary can build a significant nest egg if they have discipline and knowledge. CNBC found out the top 5 investing mistakes of millionaires.

1. Failure to diversify. Don't put all of your eggs in one basket. Do this through investing in mutual funds or if you have individual stocks, do not have more than 20% of your investments in one sector. Don't have all tech stocks, or all bank stocks for example.

2. Investing without a plan. Have a plan for your portfolio. Think about your risk tolerance, investing timeline and your goals. Are your investments going toward retirement or are you planning on selling once you make a profit?

3. Making emotional decisions. It's easy to fall into certain investing trends or fads, but the successful investor will adjust the portfolio based on research, not emotions.

4. Failing to review the portfolio on a regular basis. Make a plan to review your investments every so often. If you are investing for the long term, as most do, then reviewing it often is not as important since you can afford to ride out the ups and downs. A short term investor will want to watch the portfolio more closely. A 5% loss can turn into a 25% loss quickly.

5. Focusing too much on the historical returns of investments. The past matters a certain amount, but future performance is what really matters. One cannot invest in past gains, only future gains.

The whole article can be accessed here.