Sneak Preview: Cramer's New Investing Rules

But at the end of the 1990s, the government ruled that such contact was illegal and the only way anyone could communicate with executives was through public forums -- no more one-on-one insights. After a series of prosecutions by the government, the rule, Regulation FD, or Fair Disclosure, was interpreted to mean that unless the information was released and on the company website, it was not considered legal.

This rule and its interpretation changed everything. It made the whole concept of trying to game short- term movements in stocks almost impossible -- not just for "home gamers," my term for nonprofessional investors, but for hedge fund managers. So the new style of my trust suited the times well.

Third, my charitable trust allows me a rare and brutal look back at why I bought or sold a stock. I am on record about what my thought process was. Which is why what I am about to teach you is the single best set of lessons I have ever come up with. Most people never set down contemporaneously why they do something. If you want to minimize the mistakes you make, you should keep a diary and at that exact moment when you buy or sell, write down why you did it. You will be struck by how many of the same patterns you repeat. The charitable trust forced me to invest like an ordinary person, and that's given me a lot of insight into the kinds of mistakes that regular investors often make, not the kinds of mistakes that hedge fund managers often make.

It is my sincere hope that you will not have to make those mistakes, not have to take the serious pain that I have had, because I have taken it for you!

With that introduction, let's explore the twenty most valuable lessons you will ever need for investing -- not trading -- your personal money. Both Real Money: Sane Investing in an Insane World and Mad Money: Watch TV, Get Rich have more than adequately addressed the best ways to trade. When I wrote the sets of lessons in those books, I still had my head stuck in the world of professional money management and hedge funds, of daily performance checkups, not of sensible long- term investing over a twelve- to eighteen- month horizon.

Here are my lessons from running ActionAlertsPlus.com, my charitable trust:

1. Don't invest like a hedge fund manager. You don't have to worry about the quarter, so don't play it for the quarter. Free yourself from that mentality. There are so many services and websites and programs devoted to moving quickly and taking advantage of short- term movements and events that it's almost as if all of the financial services media were set up as if you are or wanted to be a hedge fund manager.

But as I have indicated, such thinking does not allow you to perform over a long period of time -- not just because the tax consequences are higher for short- term trading but because the best ideas are the ones you own and continue to do homework on, investments that you're confident have long- term potential and don't require minute--by-minute analysis. After all, if you're reading this book you probably don't have time during the day or even during the week to trade stocks and constantly monitor them.

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