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 seventeenth rule of investing. Read more about his rules:
Pigs Get Slaughtered
It's OK to Pay the Taxes
Don't Buy All at Once
Buy Damaged Stocks
Diversify to Control Risk
Do Your Homework
Defend Some Stocks
Don't Bet on Bad Stocks
Don't Own Too Many Names
Cash Is for Winners
No Woulda, Shoulda, Couldas
Don't Subsidize Losers
When I hear the word "hope," as in, "I
(GM - Get Report)
will come back to $35 so I can sell it," I get furious. Always remember:
Hope is not part of the equation.
Don't "hope" for anything. Hope is emotion, pure and simple. And this is not a game of emotion, other than to take the other side of the desperate. Yet, I hear "hope" more than any other word, particularly with the contingent of
(CSCO - Get Report)
. Those stocks are filled with hopeful people betting that something good eventually will happen that will drive the stocks higher.
Hoping and praying are excellent things in religion. They are integral to sports. You know that the coaches of some of these come-from-behind NCAA men's basketball teams keep players motivated through hope.
But hope is a mistaken emotion in our business. It supplants reason, it supplants rigor -- especially when it comes to low-dollar-amount stocks.
No company ever set out to have a low-dollar-amount stock. The companies fight like heck not to have them. When they have them, it is a judgment rendered by the market that is harsh, difficult to accept and ultimately, far more right than wrong. When you suffuse your thinking with hope, you end up holding on for something that most likely will never occur. Cut your losses and move on.
Remember, we don't care where a stock has been, we care where it is going, and it is most likely headed down if you are hoping.