Good Investment Strategy Beliefs by CNBC "Mad Money" Jim Cramer

Jim Cramer had a good show tonight on CNBC's "Mad Money" (6pm & 11pm).

He gave some good investing rules. Here's a re-cap:

Jim Cramer's rules before you can be successful. (These rules go against "conventional investing wisdom". I think he considers them "beliefs", actually.)

#1. Don't get stuck in the "buy and hold" mindset. It isn't a strategy. It's an ideology. (He calls it, "Stalinism" half-joking...well, not really joking, at all.) "Buy and hold" is, "really harmful for investors who want to invest wisely", says Cramer.

Adding, "'Buy and hold' means if you hold on long enough, you will make money." (It gives you a chance to let yourself off the hook if it goes down.) It let's you be lazy. According to Cramer, 'buy and hold' means you don't have to do research or homework because you feel it will always bounce back.

"On 'Mad Money' it's 'buy and do homework", not 'buy and hold'!"

If you are not doing your homework (research, following your stock and it's competitors); and listening to the quarterly conference call (that Cramer feels is, "very important"), then you are relying on "faith and hope", according to Jim.

He even uses the same term ZD has used countless times from the podium..."bamboozle".
Saying, "You have been bamboozled if you were sold on 'buy and hold'."

#2. Don't play, "woulda, coulda, shoulda". "There are no regrets. When you dwell, it becomes counter-productive", says Cramer. He calls it, "if only". (The movie you run over and over in your head, as in, "If only I didn't buy it." Zuma Dogg says also beware of the, "What if", mind-trap. As in, "What if I sell Apple at 190, and it goes to 210. (Don't worry...it dropped to 150 two days later, and two weeks later is only at 165. You can never be a loser, selling at a record high, when you bought at $50. But $190 was STILL not high enough for ANYONE I spoke with that held Apple.

So the "woulda, coulda, shoulda" burnt people some people with Apple and Starbucks this week in my world in the "what if" department, as well as the "if only".

#3. "Tips are for waiters", Cramer would like to remind you. Everyone likes a good stock tip, because everyone wants to make "easy money", so people are eager to believe these tips. "Stock tips are tempting, but not worth listening to", said Cramer.

#4. As soon as you know you have a dog/loser...

THIS IS THE ONE I SEE THE MOST PEOPLE STRUGGLING WITH. It's human nature, I guess. No one likes to admit they may have been wrong. Again, people will chase a stock all the way down -- like a guy who refuses to pull over for direction. People get too wrapped up emotionally in the decision making process. In the radio business, you play a record enough to get enough market research back. If the record doesn't take off after a while, it's never gonna take off. You can tell when you have a hit record, as opposed to a stiff. (That's what statistics are for.)

Cramer says, "We sell! We cut our losses." Zuma says, "Vegas and the stock market exchange are two places people never seem to like to cut losses until there is nothing left to cut."

#5. Don't buy all at once. "Don't be arrogant", he calls it. Watch this video for how to buy on the way down, as relating to Google stock.



cnbc.com
cramer's website
zuma's website