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
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 eighth rule of investing. To read about his first rule, click here; for his second, click here; for his third, click here; for his fourth, click here; for his fifth, click here; for his sixth, click here; for his seventh, click here.
In cars, we buy best of breed. Not even an issue. We pay up for the brand because we know that a brand, a good brand, signifies reliability. It signifies a higher level of service, a quality of ownership that can pay dividends for years.
Why don't so many of us feel that way in the stock market? Why are so many drawn to an
, inferior supermarket chains, when
Whole Foods Market
is clearly the best of breed?
Why did so many people lose money in so many different audio component stores, when
is the only company that delivers sustainable profits in that retail sector?
Why do people want
Advance Micro Devices
has proven again and again to be the best bet?
The list goes on and on. Way too many of you are unwilling to pay up for best of breed because you think that you are getting short-changed. There are very few bargains out there in the world of secondary and tertiary players. I believe that when it comes to price-to-earnings multiple, investing in the more expensive stock is invariably
because you get piece of mind.
That's why I say:
Own the best of breed; it's worth it.
. Sure, Rite Aid seems perpetually in turnaround mode and you have to love a $3 stock. Don't you? Not me; I have to tell you that I think Walgreen is the bargain of those two, because I never mind paying a higher price for the better company.
Or consider those who bought
two years ago vs. those who bought
. There was never any question among any investor that Dell was the best of that breed. But so many went astray because the others seemed like bargains.
Forget about it. Buy best of breed. Pay up. You almost never will find yourself regretting it.
At the time of publication, Cramer was long Intel.
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
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email@example.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."