Over the course of his extensive trading career, Action Alerts Plus portfolio manager and TheStreet's founder Jim Cramer has made mistakes and learned from them. Soo he created a list of 25 Rules for Investing that can help you avoid the novice pitfalls that even he fell into on occasion.
Each day, we are releasing a new rule for you to digest and integrate into your trading strategies. Rules 1-6 were posted this week.
Cramer's mission is to help you find your own bull market. But you'll find it faster if you follow his rules.
So watch the first six rules and start making money now!
Rule No. 1: Bulls Make Money, Bears Make Money, Pigs Get Slaughtered
Basically, don't be greedy.
Cramer said that pigs are greedy and then they get slaughtered.
So how do you know if you're being a pig? Are you "intoxicated" with gains? You need to watch the video to find out.
Rule No. 2: It's OK to Pay Taxes
Folks hold onto stocks for too long just to avoid the tax hit, only to watch prices crumble and their gains disappear.
So don't be afraid to pay capital gains tax. It just means you made money!
"Stop fearing the tax man; start fearing the loss man," said Cramer. Watch below.
Rule No. 3: Don't Buy All at Once
"Stage your buys and work your orders to get the best price over time," said Cramer.
So listen below as Cramer talks about how at one point in his career he bought in bulk and was "an arrogant son-of-a-gun."
Rule No. 4: Buy Damaged Stocks, Not Damaged Companies
So how do you know if there is something wrong with the company and not just the stock?
Cramer tells you in this video.
Rule No. 5: Diversify to Control Risk
Sector risk is one of the biggest mistakes investors make. If you have all your eggs in one sector, you get scrambled, said Cramer.
"If you can mix up enough different sectors in your portfolio, you can't be hit by one of the myriad perfect storms that come our way far more often than you would think," he said.
That's why Cramer believes that diversification is the only investment concept that truly works for everyone.
Watch this clip to hear why!
Rule No. 6: Do Your Stock Homework
Much like your kids, you have to do your stock homework as well. So that means:
- Listen to the conference calls.
- Go to the company's website.
- Read the research.
- Read the news stories.
Get actively involved in your portfolio and listen to Cramer tell you how below.
And don't forget. We'll keep rolling out one-rule-a-day for the next few weeks! So stay tuned!
Sign up and watch Jim Cramer's 25 Rules for Investing here!