Rule No. 13: No Woulda, Shoulda, Couldas
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, click here. Today, we present Cramer's thirteenth rule of investing. Read more about his rules:
Your head matters in this game. You need to have it on right every day if you are going to see opportunities and act on them. Yet so many of us have heads clouded with thoughts that genuinely throw us off target and make us do the wrong thing.
The most damaging recurring thought you can have is this: "If only I ..." -- you can fill in the rest. As in, "If only I had acted sooner on Electronic Arts (ERTS)." Or, "I should have pulled the trigger on Nvidia (NVDA) ahead of that quarter." Or, "I could have made a fortune if I had stayed short that Sun Microsystems (SUNW)."
Don't get hung up on the woulda, shoulda, couldas.This is wasted, damaging emotion. It is destructive to the positive psychology you need when you are making investment decisions. For a long time, I took it to an extreme. I would sit and be mesmerized by a couple of big misses, by things that I got wrong. I would be obsessed, hitting up the big miss over and over again. Not anymore. With the help of my wife, the Trading Goddess, I was able to see just how destructive such a pattern of thinking is. In fact, I have had to build in methods of tricking my mind into not playing this game. Not long ago, I absorbed a terrible loss in Charter (CHTR) at the $2 level. I knew that to keep myself from thinking "I could have sold the stock at $4 and change for a nice gain," I had to take Charter off my screen. I do that with all stocks that go up huge after I leave them or that have gone down huge and I had to take the loss for fear that they then will rally and further shatter my confidence. If you are like me, and you need help curbing this kind of destructive thinking, go to that extreme; take the stocks off your monitor or your portfolio watch. You will be surprised how much better you perform when you stop the woulda, shoulda, couldas.
|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|
|7.||Don't Panic||8.||Buy Best-of-Breed|
|9.||Defend Some Stocks||10.||Don't Bet on Bad Stocks|
|11.||Own Fewer Names||12.||Cash Is for Winners|
|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