This episode originally aired on Dec. 23, 2011
NEW YORK (TheStreet) -- "Investing is a lot like comedy," Jim Cramer told his "Mad Money" TV show viewers on Friday, "timing is everything." That's why he dedicated his entire show to going over the frequent errors that investors make when buying and selling stocks.Cramer said that knowing when to buy and when to sell is one of the most important, and most frustrating, parts of managing your own money. That is likely the reason why there is an entire cottage industry of financial advisors that tells investors that it simply cannot be done, that they should just put their money into index funds and leave it there forever. But Cramer said that while index funds have their place, telling investors that they're the only way to make money is totally bogus. Timing makes all the difference, Cramer explained. He said there's a big difference between buying stocks at the market peak in October 2007 and buying them at the generational bottom in March of 2009. There's a difference between buying stocks before the European financial crisis began to rule the world's markets, and after. Cramer explained that one reason that timing the markets is so hard is that some of the best moments to buy are during the moments of greatest terror. He said that it's almost never the right time to sell when the markets are panicking. History has proven that whether it was the crash of 1987, the flash crash of 2010 or the attacks on 9/11, what worked best was to be prudent and not to panic. Perhaps the only exception, noted Cramer, was the financial crisis of 2008. Cramer said he was widely criticized for telling investors to sell their stocks in October 2008, but with the entire financial world as we knew it on the brink of collapse, the call to sell proved to be the right one, and investors were able to side-step the additional 35% decline in the averages. But other than that one special case, Cramer said that dumping stocks into a selloff is always the wrong move. "Keep your head, because you will get a better moment to sell," he concluded.
Not the End of the WorldContinuing with his tips for investors, Cramer said that not every big decline in the markets signals the end of the world. That's why no matter what the crisis of the day, it's never a good idea to sell everything, as not all stocks are equally good or equally bad.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV