Links to other websites can have a positive effect on your website if you link to the right websites. Here’s a summary of Google’s statements:
The good side of outbound links
Relevant links to other websites can help your website visitors. For example, you could provide your readers in-depth information about similar topics or you could offer your readers your commentary on existing resources.
Outbound links can also help your credibility. Links to the right websites show that you have done your research and that you have expertise in the subject manner. Good links to other websites can make visitors want to come back for more analysis on future topics.
A very positive effect on links to other websites is that they help you to build relationships with other domain experts. If you send visitors to another website then that website might send visitors to your website in return.
The bad side of outbound links
Links to other websites can have a negative effect on your website if you don’t monitor to which websites you link. According to Google, unmonitored (especially user-generated) links and undisclosed paid advertising outbound links can reduce your website’s credibility.
If your website allows user comments or other user created contents, then you should make sure that these comments are moderated and/or you should add the rel=”nofollow” attribute to user generated links.
Google doesn’t like paid links. If you accept money for outbound links, you should also add the rel=”nofollow” attribute to the link.
Google recommends not to have more than 100 links per web page. Too many links on one page confuse your website visitors.
Should you worry about the PageRank of the linked website?
It doesn’t matter if the linked website has a lower PageRank than your website as long as the website is somehow related to your site. According to Google, webmasters should consider outbound links as a common sense way to provide more value to their users, not as a complicated formula.
The short and sweet
If you link to good websites, outbound links will have a positive effect on your site.