NEW YORK (TheStreet) -- TheStreet's Jim Cramer, who co-manages the Action Alerts PLUS portfolio, has opened up for a question and answer session with the broader retail investing public. Here's what he had to say:
What financial reason is there to limiting the number of stocks I own and why should I only own 10?
As professionals, Cramer and Stephanie Link can manage around 30 stocks in the Action Alerts PLUS portfolio, which is very overwhelming. But these are full-time professionals. Cramer says for someone who is new to the market or has a full-time, non-stock-market related job, 10 stocks is certainly enough. When you consider the time it takes to thoroughly research each company, 10 is the logical amount, unless you're a full-time professional.
How can investors master timing? How do you really know when to buy and when to sell?Most people don't know why a stock goes up or down, which usually results in them making the wrong decision. If investors study why stocks go up from demand and why they down go from supply, while studying what triggers the supply and demand -- like technicals, long-term trends and CEOs -- then investors will do well. Get Rich Carefully goes over this concept thoroughly. I just bought your book and started my first portfolio at 19 years old, I was wondering if you could give me some good starter stock advice. Take an elevated amount of risk. You have got to be in names like Google (GOOG), Facebook (FB) and maybe even Twitter (TWTR). Usually it's smart to only have one speculative stock in your portfolio. But at this young of an age, three or four speculative stocks will work. When you're young, you have the time to take risk because you can make it up down the road. 30 years ago, Home Depot (HD) and Comcast (CMCSA) were considered speculative stocks. Look at them now. I have $129,000 left on my mortgage and $150,000 in the bank. Is it wise for me to pay off that mortgage or keep the money in the bank? Investors aren't really making any money in the bank. But right now, mortgage money is very cheap and borrowing is OK. If you continue to refinance your mortgage with lower and lower rates, you will be fine paying it back over time and maintaining the mortgage. What would it take for you to slow down a little on 'Mad Money'? In 2014, "Mad Money" made some subtle changes. The typical length of the show's script is 1,450 words. This year, we've vowed to get down to 1,100 words per show. We are trying to make it easier for viewers to get more information from the show and if that means slowing it down, then that's what we're going to do. Are Ford's recent sales numbers something to worry about, or simply weather related? Cramer said he's more worried about General Motors' GM sales number, because it is an Action Alerts PLUS stock. Weather played a major role in both December and January, which weren't very good in terms of sales. The lack of sales creates a build in inventory. Then the vehicles get discounted and the companies miss their earnings marks. However, there is a weather component to auto sales, which has been terrible this year. Who are the straightest-talking CEOs? The "Bankable 21" is comprised of CEOs -- which is highlighted in Get Rich Carefully -- that investors can trust and follow. Some include: Eric Wiseman of VF Corp. (VFC), Emanuel Chirico of Phillips-Van Huesen (PVH) and Terry Lungren of Macy's (M). The CEOs who are less credible and need some facts checking first, are usually not on the CNBC TV show, "Mad Money" for that very reason. I just had a new baby boy and if you were going to buy-and-hold just one stock for him over the next 20 years, which would it be? You want to get your children involved in stocks from an early age. One stock Cramer likes is Disney (DIS), which kids at least care about and have some interest in. Facebook is another one, although it will be harder since they won't understand it at first. Google is also a stock they will understand at an early age. Don't feel pressured to buy a lot of shares either, because even one share is enough. When do you expect there to be a real flip in the U.S. dollars vs. the euro? Cramer doesn't expect a switch. Money is already coming to the U.S. in a flight for quality. There isn't a case for the dollar to go down. The U.S. has a stable economy with decent growth. The dollar will be a magnet around the world and there isn't much reason to be that excited about the euro. Is Facebook and Twitter a good investment for young people? How exactly are these two earning money? Facebook is actually making a fortune, Cramer said. It's becoming an earnings-per-shares story, which helps investors build a bullish case based on 2016 estimates. The stock is building momentum, since the company has figured out how to monetize mobile. Investors can make a solid bull case for Facebook, but Twitter is a little different. It's different because investors will continue to own Twitter no matter what, with the belief that it will eventually make money. That isn't to say Twitter won't be successful, only that investors will continue to own the stock regardless of earnings. These are both cult stocks. What are cult stocks all about and how can investors pick the ones that will bring them positive returns? Investors need to understand that cult stocks have no valuation parameters. They cannot be measured with typical financial metrics like most companies. For that reason, these stocks are held to a completely different standard. Cult stocks are about the next big thing, and include stocks like: Netflix (NFLX), Twitter, Facebook, Tesla Motors (TSLA), SolarCity (SCTY) and marijuana stocks. Cramer called Netflix and Facebook "tremendous opportunities." I would like to invest in silver and have $15,000 to do so. What would you suggest? Silver does not have an investment case at the moment. Cramer said he doesn't love gold, but acknowledged that it has a place in an investor's portfolio. There was not a silver stock that Cramer could ever recommend. Plenty of people love silver, I'm just not one of them, he said. What's your take on investing in marijuana stocks? This sector is becoming real hot. The stocks seem sketchy, which is the opposite of companies like Bristol-Myers Squibb (BMY) or Boeing (BA). Currently TheStreet and MainStreet are doing a lot of research trying to understand these marijuana companies and their financials. Stay tuned. What was your biggest financial mistake? Believing that low-dollar stocks were positions you couldn't lose a lot of money in. Low dollar does not equate to low risk. What do new investors need to know when getting involved in today's market? Trading is for suckers now, Cramer said. Trading doesn't work anymore because it's all about algorithms and certain price levels. Retail investors simply cannot compete with these high-frequency trading firms. Therefore, they should just try to buy low and sell high over longer periods of time. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts