This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cramer's 'Mad Money' Recap: How to Gain From the Long-Term Game

Cramer said it's practically impossible to call a bottom in a stock, so if investors are looking to buy 400 shares of an $90 stock, they should buy 100 shares right now at the $90 price. Then if shares slip to $85 a share, buy another 100 shares. Buy 100 more if the price hits $81, then the rest if it falls below $80.

Cramer said he prefers to use wide scales because it affords investors more flexibility. The worst-case scenario in this example would be the stock going higher than $90 a share, in which can you've just made money, albeit less than you were expecting. But in the long run, buying more as a stock goes lower is the right way to buy.

Know When to Sell

"Every stock comes with an expiration date," Cramer told viewers, and the next lesson is all about knowing when to sell.

Cramer said knowing when to sell a stock is every bit as important and knowing when to buy it. That's especially true when it comes to your winners.

Despite the fictional character Gordon Gekko's proclamation that "greed is good," when it comes to gains in your portfolio greed is downright dangerous, said Cramer. Investors have to take some profits in their winners, he said. You haven't really won until you take a little off the table.

Why sell your winners? Simple diversification. What was once 15% of your portfolio when you bought it has now grown to over 20%, and according to Cramer's rule on diversification, no single sector should ever account for more than 20% of your portfolio.

As for the losers, Cramer said you don't need him to tell you they should be sold, but a frequent rookie mistake is to hold onto your losers and hope they'll someday get back to even. This thinking is the worst kind of amateur mistake.

Take the small loss now, he said, and avoid the bigger ones that will likely be coming. Don't give your losers the benefit of the doubt.

Cramer said younger investors can afford to wait a little longer to sell than older ones because older investors can't afford to take the risk of losing their gains closer to retirement. Take all of your invested capital out, Cramer concluded, and keep playing with the house's money.
2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.21 -0.44%
FB $117.80 -0.22%
GOOG $701.26 0.80%
TSLA $211.34 -5.00%
YHOO $36.94 2.60%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs