The latter point's easy to counter: You don't have the time? Give it to someone else. You don't understand how to read a balance sheet? Give it to someone else. There are lots of good managers out there who will beat you simply because they are at it every day and you can't be.
It's the first concept, though, that I find really needs debunking. Buying and holding became the be-all and end-all for many people in the 1990s.
"You know what? I am just going to hold on to that
because it has to go back to $100, where I bought it." Or, "Why sell
now? When it gets back to $70, I am going to sell it because all of the texts say that if you hold things for the long term, everything works out."
Huh? What text says that? I don't know of it. That's just a fictional contortion of what the texts say.
That's why I say: Before you buy any stock -- before you purchase
(CAT - Get Report)
, before you buy
-- please, please,
do your homework
Listen to the conference calls. Go to the company's Web site. Read the research. Read the news stories. Everything's available on the Web. Everything.
But if you fall back on a buy-and-hold strategy for an
(MSFT - Get Report)
, I can assure you that you will be soundly beaten by professional managers with good track records who are actively searching for good stocks all of the time.
Buy and homework, not buy and hold.
Tonight is the night that "Mad Money" with Jim Cramer debuts at 6 p.m. EST! I hope you will watch and call me (1-800-743-CNBC) and have a terrific time!