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This program was last aired on Nov. 21. NEW YORK ( TheStreet) -- Anyone can turn a profit in the stock market, Jim Cramer told "Mad Money" viewers, if they're willing to put in the time and effort. Anyone can do it, but only if done the right way, he added. That's why Cramer dedicated his entire show to the notion of long-term investing, a term that's gotten somewhat confusing over the years -- so much so that it has become one of the biggest obstacles for new investors. Cramer said that too often the term "long-term investing" is used as an alibi or excuse for poor performance resulting from simply not paying attention. The term "buy and hold" often means "buy and forget," which is a terrible investing strategy. Being in the game for the long term does not mean investors can afford to take short-term losses. Nor does it justify owning damaged goods, hoping they'll recover "someday." Investors must always keep track of their investments, said Cramer, and fortunately it's never been easier to do. Whether it's looking over Securities and Exchange Commission filings or searching the Web for the latest news and analysis, finding out what's happening at the companies you own is a necessity. There's no excuse for laziness, said Cramer, especially in an age where quarterly conference calls are only a click away. "Stocks are still the best way to make money," Cramer concluded, but the notion of "buy and hold" needs to become a thing of the past.
Price MattersCramer's next lesson for investors? Few things are more important than price. Whether you're a short-term investor or planning on owning a stock for years and years, the right price matters. Put simply, when you pay too much, it's that much harder to rack up big gains. Fortunately, if your time horizon is a long one, you can afford to wait and be patient for that perfect price to arrive. In the real world, though, the notion of the "right" price is a farce, said Cramer. There will never be an "all clear" signal that now is the right time to buy. So how should investors approach this problem? Buy in increments.
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 breakeven. 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.