Rule No. 22: Wait 30 Days After Warnings

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 twenty-second rule of investing. Read more about his rules:

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. Don't Own Too Many Names
12. Cash Is for Winners
13. No Woulda, Shoulda, Couldas
14. Expect Corrections
15. Watch Bonds
16. Don't Subsidize Losers
17. Check Hope at the Door
18. Be Flexible
19. Quit When Execs Do
20. Patience Is a Virtue
21. Be a TV Critic

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Few rules have saved me more than the 30-day preannouncement rule.

When Tibco Software(TIBX Quote) preannounces a bad quarter, do you rush to buy it? Are you someone who put money to work in Waters(WAT Quote) right after that vicious preannouncement the other day?

If you are, this rule is for you:

Always wait 30 days after an earnings preannouncement before you buy.

I designed it because I recognize how compelling some of these price adjustments are, but they often are not deep enough to make the stocks ultimately attractive.

Here's why. When a company preannounces a bad quarter, it isn't just looking at the past. It is looking at its order book, its future. Believe me, if there were any hope that the company wouldn't have to preannounce -- hope in the form that maybe something could get better, not worse in the next 30 days -- the company would wait.

Preannouncements signal ongoing weakness. That's why I like to wait 30 days to see if anything has gotten better before I pull the trigger to buy.

Sure, I will miss some great opportunities. Most of the time, though, after 30 days, I find that there is more woe and another leg down! If there isn't, then I might miss a point or even 2, but I will be on terra firma. That's the only thing you want to be stepping on in any market, including this one.

	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
	13.	No Regrets		14.	Expect Corrections
	15.	Know Bonds		16.	Don't Subsidize Losers
	17.	No Room for Hope		18.	Be Flexible
	19.	Quit When Execs Do		20.	Patience Is a Virtue
	21.	Be a TV Critic		22.	When to Wait 30 Days
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