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Rule 11: Don't Own Too Many Stocks.

In my years as a hedge fund manager,
I spent three hours EVERY DAY
analyzing the mistakes of the day before.

That was my major task,
one that I completed before anyone else came into the office,
generally between 4 a.m. and 7 a.m.

I would analyze every losing trade --
you don't need to analyze the winners, they take care of themselves --
and try to figure out how I could have made more money or lost less money.

I was maniacal about it.

And after a couple of years of this,
I realized that good performance could be directly linked to having fewer positions.

I never will buy a stock without first taking one off.

That's a great discipline and one you should adopt, pronto.

All the bad money managers I know have hundreds of positions.

All the good ones have a few that they know inside out and like on the way down.

That's why I say: Don't own too many stocks.

I know it can be constraining.

You will end up selling some stocks that are good for stocks that aren't as good.

But, take it from me,
as someone who has owned stocks for 39 years,

it's far more likely that you will be selling marginal companies to get bigger in better ones.

That's how to make a portfolio really work for you.

When I lost the most money as a hedge fund manager -- my "sheets" -- my position sheets -- were as thick as a brick.

When I made the most money, my sheets were, well,

one sheet of paper, double-spaced.

And I ran hundreds of millions of dollars.

Please remember that whether you are a pro or an amateur,

you can always have too many positions.

Action Alerts Plus portfolio manager and TheStreet's founder Jim Cramer has learned a lot over his 30+ years of investing. So he created a list of 25 Rules for Investing that can help you avoid the novice pitfalls that even he fell into on occasion.

For instance, "All the bad money managers I know have hundreds of positions," he says.
"All the good ones have a few that they know inside out and like on the way down."

Rule 11: Don't Own Too Many Stocks.

"I never will buy a stock without first taking one off.  That's a great discipline and one you should adopt, pronto," suggests Cramer.

That's why he and his team keep the AAP Portfolio at around 30 stocks they can properly manage. 

For more on that, listen to Rule #11 above and then found out when he lost the most money as a hedge fund manager.

And don't forget, we are rolling out one-rule-a-day for the next 25 days! So stay tuned!

Sign up and watch Jim Cramer's 25 Rules For Investing here!

 

And for more Investing Rules, watch these: