Rule No. 7: No One Made a Dime by Panicking
Editor's note: Jim Cramer's new book, Real Money: Sane Investing in an Insane World
, is available in selected bookstores now. As a special bonus to RealMoney
readers, we will be running Cramer's "Twenty-Five Rules of Investing." For more about the new book and to order it,
You see it over and over again. A stock gets hammered. People flee after the hammering. The market gets crushed on a huge down day. People leave at the end of the day. A sector gets annihilated. Quickly. People can't take the pain; they bolt after the annihilation.
Panic is the operating instinct in all of these cases. There's something basic and instinctive about panic, about the desire to flee. It might work when it comes to individuals and things that might threaten us physically. But it can't make you a dime. That's why I say:
No one ever made a dime panicking.There will always be a better time to go, a better time to leave the table than the one brought on by panic. Let's take the latest panic, the run out of Biogen Idec (BIIB). As soon as I saw the panic in that stock, I wanted to run the other direction; I wanted to buy. If you bought the heart of that panic, the $36 price, you could have made a quick 5 points already. If you flipped it then, you could have gotten back in and already would be up a couple for the investible side of the ledger. I think that stock ultimately will go back to the $40s and maybe even the $50s, making a mockery of those who fled. We get mini-panics all the time in the market. We had a mini-panic in Starbucks (SBUX) off a weak monthly comp number. We had a mini-panics in Panera (PNRA) and Whole Foods (WFMI) off a couple of not-so-great months. These down-5 and down-10 situations don't need to be chased or participated in. A better time to sell will come.
|1.||Pigs Get Slaughtered||2.||It's OK to Pay the Taxes|
|3.||Don't Buy All at Once||4.||Buy Damaged Stocks|
|5.||Diversify to Control Risk||6.||Do Your Homework|
|Check back for more of Cramer's Rules|
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV