This is a rebroadcast of a show that originally aired on August 25.
As part of a special "Frequently Asked Questions" edition of his
"RealMoney" radio show Wednesday, Jim Cramer said his biggest market mistake has been believing he's "hot and nothing can go wrong," he said.
"When I have gotten it right over the course of three or four weeks, I get cocky and feel invincible," Cramer said. But every time this happens, he "gets crushed and destroyed."
"I need you to recognize when you're hot, you're not," Cramer said. Otherwise, people will get hurt.
Moving on to another frequent question, Cramer said he doesn't believe bonds have a place in people's portfolios until they're in their 50s.
"Bonds don't kick in" until people reach that age, he said. If people start with bonds initially, they will not have made any money.
Bonds are places where you can lose money, too. That's why Cramer said he always suggests Treasuries, as they are "best-of-breed." Otherwise, forget going into bonds as "they are too conservative," he said.
Cramer said he avoids panic by doing advance homework on stocks he invests in. However, he said he has lost money with his charitable trust,
Action Alerts PLUS, since he has restrictions and is not able to get out of a stock right away when he has done the wrong homework.
Cramer reminded investors that they should focus on the
Cramer said people need to constantly think about interest rates, as they determine what stocks traders should be in.
The Fed determines if the market is "slowing or roaring," he said. "You need to focus on the Fed because it's important."
When doing homework or research on a company, Cramer said he likes to start at the back first. When he has a printout of the company's conference call, for example, he'll first go to the back, since that's where the where the Q&A section is.
He also likes to hear what the management has to say and if it believes in itself or not. In addition, it's important to listen to what the company's businesses are levered to or dependent on, and how they are doing vs. last year, Cramer said.
"Are they making more money with what they sell?" he asked. "This matters because it helps people predict what's going to happen in the future."
Cramer said the strategy of buy-and-hold is not the best way to make it in the market today.
In the past, many companies were oligopolies, and they set the prices for products. But now things have changed and "businesses are fluid," he said. When businesses get bad, we need to get out of them and sell, Cramer said.
"Buy-and-hold does not include sell, and that's wrong," he said. "It's a recipe to lose money."
Wait for It
Cramer said people should never buy a stock just for the sake of being in the market because it will cause them to get hurt.
In addition, buying all at once is another way to get hurt, he said. Buy stocks in stages and over time at better prices, Cramer recommended.
An important question he gets asked is how the media affects the stock market.
"It is a very powerful influence for the short term, but not a very powerful influence for the long term," unless the news being reported is correct, which it is often not, Cramer said.
Most people you listen to on the TV or in the media wish they weren't covering business, so consequently, you get journalists who are not able to give the general public "the inside skinny," he said. However, "nobody deliberately sets out to get it wrong," Cramer said.
He said he relies on media outlets that move stocks. Cramer said he reads
The Wall Street Journal
The Financial Times
. In addition, he watches
and reads trade papers.
Jim 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
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