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
readers, we will be running Cramer's "Twenty-Five Rules of Investing." For more about the new book and to order it,
. Today, we present Cramer's eighth rule of investing. To read about his first rule,
; for his second,
; for his third,
; for his fourth,
; for his fifth,
; for his sixth,
; for his seventh,
In cars, we buy best of breed. Not even an issue. We pay up for the brand because we know that a brand, a good brand, signifies reliability. It signifies a higher level of service, a quality of ownership that can pay dividends for years.
Why don't so many of us feel that way in the stock market? Why are so many drawn to an
, inferior supermarket chains, when
Whole Foods Market
is clearly the best of breed?
Why did so many people lose money in so many different audio component stores, when
is the only company that delivers sustainable profits in that retail sector?
Why do people want
Advance Micro Devices
(AMD - Get Report)
(INTC - Get Report)
has proven again and again to be the best bet?
The list goes on and on. Way too many of you are unwilling to pay up for best of breed because you think that you are getting short-changed. There are very few bargains out there in the world of secondary and tertiary players. I believe that when it comes to price-to-earnings multiple, investing in the more expensive stock is invariably
because you get piece of mind.
That's why I say:
Own the best of breed; it's worth it.
. Sure, Rite Aid seems perpetually in turnaround mode and you have to love a $3 stock. Don't you? Not me; I have to tell you that I think Walgreen is the bargain of those two, because I never mind paying a higher price for the better company.
Or consider those who bought
two years ago vs. those who bought
(HPQ - Get Report)
. There was never any question among any investor that Dell was the best of that breed. But so many went astray because the others seemed like bargains.
Forget about it. Buy best of breed. Pay up. You almost never will find yourself regretting it.