Cramer's 'Mad Money' Recap: Demystifying Wall Street (Final)
An investment, on the other hand, is a long-term trading thesis that is not event driven. Cramer said investments are not an excuse to buy and forget, however, they can still go wrong. That's why he recommends one hour of homework a week for each stock in your portfolio. As long as your investment thesis is still intact, he said, investors can continue to own their investments.
"Never turn a trade into an investment," Cramer reminded viewers, even if that trade is a successful one.
CorrectionsCramer's next item in the Wall Street dictionary, the dreaded "correction." Cramer said a correction is nothing more than a roaring market turning around and retreating, sometimes as much as 10%. He said corrections may feel like the end of the world, but panicking is always the wrong reaction.
Cramer explained that corrections are simply what happens when stocks go up too far, too fast. Investors should expect corrections, he said, and not beat themselves up if they fail to see one coming. "We don't have to like them," said Cramer, "but we do need to acknowledge that they happen."
ExecutionCramer's final word for the day: Execution. He said this is a tough one since it's largely subjective, but execution usually refers to management's ability to follow through on its plans. When you own a stocks, he said, you always run the risk of management screwing up, and not producing what they promised.
Cramer said this is why it's always worth paying up for what he calls "best of breed" companies, those with proven track records and a management that consistently delivers what it says. "You want companies with proven, seasoned management teams," he said, as they're less likely to drop the ball.--Written by Scott Rutt in Washington, D.C. To contact the writer of this article, click here: Scott Rutt. Follow TheStreet on Twitter and become a fan on Facebook. To submit a news tip, send an email to: email@example.com. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. Click here to sign up for Jim's Daily Booyah to get the Mad Money recap delivered to your inbox. For more of Cramer's insights during the Lightning Round, click here.
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