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,
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 - Get Report) 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 - Get Report) 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|