Rule No. 17: Check Hope at the Door

In this special look at Jim Cramer's latest book, he warns about the danger of wishful thinking in this business.
By Jim Cramer ,

Editor's note: Jim Cramer's new book,

Real Money: Sane Investing in an Insane World

, is available in selected bookstores now. As a special bonus to

RealMoney

readers, we will be running Cramer's "Twenty-Five Rules of Investing." For more about the new book and to order it, click here. Today, we present Cramer's seventeenth rule of investing. Read more about his rules:

    Pigs Get Slaughtered It's OK to Pay the Taxes Don't Buy All at Once Buy Damaged Stocks Diversify to Control Risk Do Your Homework Don't Panic Buy Best-of-Breed Defend Some Stocks Don't Bet on Bad Stocks Don't Own Too Many Names Cash Is for Winners No Woulda, Shoulda, Couldas Expect Corrections Watch Bonds Don't Subsidize Losers

When I hear the word "hope," as in, "I

hope

General Motors

(GM) - Get Report

will come back to $35 so I can sell it," I get furious. Always remember:

Hope is not part of the equation.

Don't "hope" for anything. Hope is emotion, pure and simple. And this is not a game of emotion, other than to take the other side of the desperate. Yet, I hear "hope" more than any other word, particularly with the contingent of

Sun Microsystems

(SUNW) - Get Report

,

Nortel

(NT)

,

Gateway

(GTW)

,

Cisco

(CSCO) - Get Report

and

EMC

(EMC)

. Those stocks are filled with hopeful people betting that something good eventually will happen that will drive the stocks higher.

Hoping and praying are excellent things in religion. They are integral to sports. You know that the coaches of some of these come-from-behind NCAA men's basketball teams keep players motivated through hope.

But hope is a mistaken emotion in our business. It supplants reason, it supplants rigor -- especially when it comes to low-dollar-amount stocks.

No company ever set out to have a low-dollar-amount stock. The companies fight like heck not to have them. When they have them, it is a judgment rendered by the market that is harsh, difficult to accept and ultimately, far more right than wrong. When you suffuse your thinking with hope, you end up holding on for something that most likely will never occur. Cut your losses and move on.

Remember, we don't care where a stock has been, we care where it is going, and it is most likely headed down if you are hoping.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by

clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to

jjcletters@thestreet.com. Listen to Cramer's RealMoney Radio show on your computer; just click

here. Watch Cramer on "Mad Money" at 6 p.m. EST weeknights on CNBC. Click

here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click

here to get his second book, "You Got Screwed!" and click

here to order Cramer's autobiography, "Confessions of a Street Addict."

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