tomorrow morning if that's a bad number you can short fxa. >> fedex is not bill actman's pick to click. >> karen? >> time to take money off the table. well point had a great run. >> follow me on twitt twitter @scottwapnercnbc. cramer starts right now. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, i'm just trying to make you some money. my job is not just to entertain you but to educate. call me at 1-800-743-cnbc. in recent years, i have to tell you, i think stocks have become the most hated commodity in existence! they're certainly hated -- well, let's say any time more than i can remember in my career.
but i still believe that anyone can turn a profit in the stock market. as long as you're willing to put in the time and effort to keep track of what you owe. i wouldn't come out here every night and try to educate you if i didn't think this was more than just ha theoretical possibility. it's feasible for the vast majority of people watching the show. you can succeed at managing your own money. if that's the case, why is it so darn difficult? how come so many people struggle to make money in the market? how the heck can i believe it's possible for you to beat the averages? the big benchmarks like the s&p 500, the dow jones average when so many people so regularly fail to do so? simple, you can do it, but you've got to do it the right way. one of the biggest obstacles is a lack of clarity about what is the right way to do it. what is investing supposed to mean? now, i've seen countless people try to follow conventional wisdom about money management only to have their investments wiped out because the conventional wisdom is wrong. and the worst part is, these
people had no idea they were making a mistake. hey, you know what, they thought they were being responsible. in other words, to borrow a phrase from "cool hand luke." >> what we've got here is failure to communicate. >> that's right. failure to communicate. and that's why tonight we're going to spend some time demystifying the concept of, wow, here's a code word, long-term investing. an idea that's been misinterpreted in so many ways it's become more of a hindrance than a help for most of you. listen up because i'm going to set you straight tonight. here on "mad money," we're about long-term investing, but there's a serious problem that goes like this. too often they let the term long-term get in the way of successful investing. if you think it's about making boat loads of money over years and decades even lifetimes, consider me on board. and that's something i think i can teach you how to do using the disciplines that allowed me to make fortunes for my already
rich partners. however, there's a darker side to this concept. all too often, i've seen people invoke -- >> the house of pain. >> -- long-term investing as an excuse, an alibi either for poor performance or not paying attention to what they own. you shouldn't worry about your losses or profits you're missing in the presents it's okay to take short-term pain because you'll make back the money you're losing with long-term gains. hey, look, okay, sometimes that's true. it's not just all a big joke. but most of the time, most of the time losing money many month after month after month isn't a good recipe for making money over the long-term horizon. but a bunch of short-term losses don't magically transform into long-term gains if you wait long enough like so many people think they do. yes, money making over the long haul is the ultimate goal in this game. . for short-term thinking and believe me that kind of thinking will only make you a worse investor.
before i can teach you how to invest for the long-term, i've got -- where do these lead you astray? at what point do you need to cover your ears so that you won't listen to the conventional wisdom and end up steering your portfolio on to the shuls. it's not as simple as owning stocks for the long-term. please don't confuse being a good investor with the idiotic ideology of buy and hold or as i skept skeptically dub it buy and forget. it's been the conventional wisdom for decades. and this has lost more money for people than the last two crises unfinanced combined. just because you have a long-term horizon, that doesn't mean you can afford to take loss after loss after loss in the short-term and just because those losses are unrealized, believe me, that doesn't make them into gains or even potential gains. losses are losses realized or otherwise. and the notion of being in something for the long-term does
not justify owning damaged goods. the stocks of companies that are in bad shape in the misguided hope, well, hey, come on, man, it's got to come back if your hold it for the long-term. the idea of buy and hold is once you purchase your stocks, you wait. me, i've never liked waiting and it also happens to be a terrible strategy if you think it is a strategy. that's why i'm constantly saying you have to keep track of your investments, doing the homework i talk about on the show. and you've got to do it all the time, reading the sec filings, listen to the conference calls, reading the transcripts. much of the research available can be found on the web like yahoo fitness and that's worth reading. hey, it's your money. invest the time in it. act like investing for the long-term means you have a license not to pay attention, you don't have to worry. wrong! but you always have to pay attention. the moment you stop is the moment you start losing money. and you'll never be able to recover from those losses until you get engaged with your portfolio again. sometimes companies can go in
secular decline and their stocks never really recover. in that case, you can't afford to wait for a turn around, you have to get out before the damage becomes too horrific. hey, just ask the people who rode out research in motion or nokia or radioshack. these things have really come down. or in other words, being a long-term investor doesn't give you a license to be a lazy, apathetic investor. as anyone who owned stocks through the misery and horror of the crash in 2008 knows that doesn't work. investing for the long-term does not mean owning stocks forever. no matter the cost, if there's one good thing the crash did, it's disabuse people of the notion of buying and holding stocks. go ahead, and magically they'll somehow make you money. as long as you don't pay too much attention or try too hard to game short-term moves. from the stories i read in some pundits i hear, the lessons are already being forgotten. after that happen, not on my watch. i've been one of the loudest opponents of buy and hold.
in this era of crashes and many other things, many have tried to change their tune. or they've been so discredited that no one listens to them anymore. however, that doesn't mean you should write off the idea of long-term investing too. it doesn't mean stocks can't make you money over an extended period of time. well, that's what many of you think if you confuse long-term investing with buy and hold investing. buy and hold was always bogus, but the truth is stocks are the best way to make money for your retirement, for your 529 plan or build up savings to afford big-ticket items like a house or a car. especially stocks with consistently growing dividends. ones that allow you to compound your wealth by investing. the dividend payers that i highlight, excuse me, in many of my books. that said, you will never get any of those things if you use the concept of a long-term horizon as an excuse or an alibi
for bad performance. and holding stocks that can't even afford to pay their debts let alone some of their dividends. something you won't even know about if you buy and forget. so here's the bottom line, long-term investing has gotten mixed up with a lot of bad ideas over the years, that doesn't mean it's impossible or that it's not worth trying. i can on this show teach you the disciplines and strategies that will allow you to build long-term wealth by investing in stocks. just as long as you remember that i'm a long-term investor in quotes is no excuse for not doing the homework or following the rules i lay down. if anything, being in stocks for the long-term requires more diligence and more patience than if you're in them for the short-term. so don't throw away all the lessons i teach you, you're going to need them. to paraphrase that fabulous poetic amateur investor and world renowned beauty gertrude stein, a loss is a loss is a
loss. unrealized or otherwise. and don't you ever forget it. bill in pennsylvania, bill? >> caller: hey. >> speak up, bill. the floor is yours. >> caller: hey. i thought i was a rock star, made a couple of great trades, i made about seven points in a week on one stock. another couple points on another only to have the stock continue to run up another 10, 12, 14 points wondering if you have any advice on how i can realize the full potential and become more of an investor rather than a trader. >> okay. you have to label your stocks and say this is a core position. when it's a core position that means you can sell some, but you must own the rest. that's what i do for actionsalertplus.com. if it's a core position, i can sell some on a ramp but not all of it, period. anoint your stocks, decide what should be core and then hold on to that core position! kim in california, kim? >> caller: hi, jim. >> jim, what's shaking?
>> caller: i wanted to give you and your staff major problems for recommending u.s. airways. >> i've got the smartest staff in the world. they make me look great every day. there's swell people there too. sports fans, most of them. >> caller: i'm a new investor coming in off the sidelines and that stock's up over 10% for me. >> well done. >> caller: my question is, what's the difference between buying on a dip and buying on a pullback, and can you give us an idea of the percentage that fits those? >> sure, that's a great question. i think 3 to 5 is a dip, a pullback is 5 to 8. a little dip, you know, intraday, down 3%, down 5% but 5% to 8% is a bull market correction. so one is a dip and the other is a correction. and in the correction, i say give it wide berth. i think the stock's at 12, put in a bid to buy some at 10. but if there's a correction, it's going to be under 10. so 12 to 11 and change on a dip and then if it's going to be a real correction, sure, give it some room.
okay. and if you get 10% down, that's fine. get 20% down, then you've got to leave room. a correction can be that deep for some stocks. i don't know when long-term investing became a bad thing. it's the right thing if it's done with homework and discipline, but not with just some label that says i don't have to worry about it, i label it long-term. "mad money" will be right back. don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to email@example.com. or give us a call at 1-800-743-cnbc. miss something? head to mad money.cnbc.com. it's a brutal full-contact sport. >> from the time the whistle blows --
>> traders bracing for what could be a wild session. >> this is the last play of the game. >> markets absolutely getting hammered today. >> i know it's not easy but i promise to keep fighting for you. >> jim cramer, leveling the playing field for all. >> the road is a tough one, but the payoff can be your greatest win of all. >> join "mad money's" training camp weeknights. ♪ ♪ unh ♪ ♪ hey! ♪ ♪ let's go! ♪ [ male announcer ] you can choose to blend in. ♪ ♪ yeah! yeah! yeah! or you can choose to blend out. ♪ oh, yeah-eah! ♪
here's a big las vegas ding, ding, ding, bing, bing, bing boo-yah. >> a big staten island, new york, hey now, forget about it, boo-yah! >> nashville. >> michigan. >> california. >> alaska. >> boo-yahs come from all across america. let cramer help you channel yours. "mad money" with jim cramer weeknights on cnbc. let's talk the price is right. not that game show, i mean the stock show. if you want to actually make money from your stocks, which i know you do, then it's absolutely critical that you buy them at the right price, not the
wrong price and that's true whether you're making short-term trade or purchasing something if everything goes right you expect to hold for years and years and years. most people don't think that. they think it doesn't matter. when you pay too much for a stock at the beginning, you make it vastly more difficult than to rack up the big gains on "mad money." if you get the price wrong, you may not make any money at all. i think price is dramatically underrated by you as a determinant of successful investing. tonight i'm giving you the power of price it's due. it's incredible how unimportant people think that first buy is. how do you find the best price to pull the trigger? when you're investing for the long haul, you have one advantage over people using the shorter term horizon. traders don't have the luxury of exploiting. i'm talking about time. as a long-term investor, you've got all the time in the world. now when you want to buy a stock because you like the underlying company's prospects and when there are no near term catalysts to drive up the stock price any time soon, you can afford to be patient. you don't have to pay the price the market's giving you at that
moment. you can be patient and wait for the stock to come down to your price. that's right. what you can do is keep your bat on your shoulder and wait for your pitch. you'll never get a clear signal saying it's time to buy. so how exactly are you supposed to know how long you should wait before you pull that trigger? simple, you don't know, okay. this is one of those areas where you have to embrace the fact of your ignorance. that's why i tell you to buy your stocks in increments, loading up gently and over time. if you buy at one level, the stock goes down further, you're going to feel like an idiot for losing money so quickly. you'll get frustrated and dump the whole position a point or two down and hear people in the lightning round saying, oh i'm down two bucks, jim, i might want to sell. no, use the weakness to buy more. patiently picking up more shares over weeks and months, avoid
paying the wrong price which is what matters. thatst why back at my old hedge fund and currently at my charitable trust, actionsalertplus.com, i play with an open hand not a poker face. i always like to buy with wide scales on the way down. and that is some authentic wall street gibberish. allow me to translate into cramerican english, describes the way you should purchase a declining stock when it's approaching the bottom. you want to get the right entry point for the long-term investment and this is the way to do it. now, it's practically impossible to call a perfect bottom in an individual stock. people always tell me they caught the bottom, i think they're probably lying. that's why we don't try to time the bottom by buying all at once. no one that's good. the odds of being wrong are too great. instead, the smart move, the way the pros do it and you should do it, buy incrementally on the way down. consider it your insurance against the bad judgment of thinking you know the stocks done going down and you want to be all in because you're so sure that you're getting in on the ground floor. in this game, i've got to
presume that there is a basement if not several subbasements. this notion of scaling in to a position on the way down is a trick that helps you get around the difficulty of timing the market exactly. let's say you want to buy 400 shares of caterpillar and it's trading at 90. if you buy all 400 shares at once and it tips down to 85, you're going to feel like a stooge. and worse, you'll have lost two grand in a brink of link of an . the approach is to start small, no more than 100 shares at 90, wait for a pullback, buy more, rather than contemplating suicide, you're at a better exit point. you're rooting against the stock so you can buy at 100 shares of a lower price, buy the next 100 shares at 85, drops to 81, put on the final 100. if the stock sinks below 80, well, you had an amazing price there. the worst-case scenario, goes higher in the initial buy and make some money.
even if you don't have as many shares as you wanted. that's a high quality problem where i'm from. that way you won't regret about selling at the wrong price. i sold the stock at 10, went to 15, what do i do? you know about buying incrementally, let's talk about scales if you're buying a stock that's sinking lower and lower and lower every day. you can buy with strict scales or wide scales. what's the difference, let's stick with the example. using strict sales, you would say buy 1,000 shares. every time the stock loses a point, you buy another 1,000, you buy more. the essence of strict scales is that you buy the same increments every time c.a.t. goes down a point, whatever size decline makes sense. you purchase the same amount of stock using strict scales. i regard it as smart and responsible. sometimes it can hurt you. that's why i often like to use wider scales, particularly a volatile cyclical stock like caterpillar. the trick with wide scales, you buy larger and larger positions as the stock goes lower. the first example, 90, that was
a strict scale, this one was a strict scale, let's talk about a wider scale. i used to think of them as a pyramid. if a stock lost a point, i would put on 1,000 shares, another point, 1,500 shares and it's so low you can hardly read how poor the stock and then you double down. the lower the stock goes, the larger your buy should become. both work. you've got to get comfortable. the great thing about wide scales, they leave you with room to maneuver. you're going to want to pour your money in. it allows you to buy the greatest number of shares a the the lowest price. you can build a wide pyramid. when you like a company's fundamentals, you can wait for a pullback or sector wide selloff to accumulate a big position as it goes down. make sure the story is still intact, please. the stock's never going to be broken no matter how far it falls. you need to abandon ship and that does happen and i'm sorry it happens, but it happens every day. here's the bottom line, few things are more important than
price. as the long-term investor, you have the luxury of being able to wait for a good one. be patient, keep your bat on your shoulder, wait for the right pitch. remember, don't buy all at once. when you're trying to catch a stock on the way down, be sure to buy it on strict scales and even better wide scales and build that pyramid to get the best possible price. bill in connecticut, bill? >> caller: boo-yah, jim. >> boo-yah, bill. >> caller: from connecticut, i own some stock and some dividend reinvestments for over ten years. now i'm trying to determine how i get a cost basis. >> well, you should get -- you can get your cost basis. you have to look at the average number of shares you bought. and then i think your brokers are going to have to help you on the cost basis. i'm not sure when they awarded -- it's a great question. and i'm not sure, but my broker has -- i can't own individual stocks now, it always had an individual price for me e whenever i wanted it. i would go to your broker. price matters, put on that poker face and be patient. you have the luxury.
institutional investors don't. after the break, i'll try to make you more money. does the market have you stumped? no fear, cramer's here. just e-mail him. firstname.lastname@example.org. the last thing you expect from the u.s. attorney is a sense of humor. he's got one but he comes and means business anyway. last year on the interview, he joked he had subpoenas in his hands for the audience. hey, maybe this year he brings them. >> the biggest investor event of the year, "delivering alpha." this billboard down? e e people find out state farm does car loans as well as they do insurance, our bank is through. good point. grab an edge. look there's two guys on the state farm borrow better banking sign. nope for real there's two dudes on the state farm borrow better banking sign. [ reporter ] breaking news from the state farm borrow better banking sign... we're seeing two men that have climbed the borrow better banking sign gentlemen please get down
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every stock you buy comes with an expiration date. knowing when to sell those stocks especially your winners. holy cow, this is heresy, is every bit as important as knowing when to -- >> buy, buy, buy! >> it's more critical because so many people make a huge number of selling related mistakes either by panicking and selling into weakness or by getting greedy and not selling at all. if you picked the right stocks, the ones with fabulous long-term stories and get in at the right prices, you'll have winners up big. the point is to not go all gordon gekko on me, greed is not
good in this show, it's dangerous, downright dangerous. bulls make money, bears make money, but pigs get slaughtered. when you've got a serious winner, even when you think it has many years of gains left in it, you've got to take some profits off it. got to take some profits. i know you'll be tempted to let your winners ride, but that's a mistake, you have to ring the register on some of your position otherwise your winners could become losers. it's best to lock in profits while you still have them by selling incrementally into strength. believe me, you haven't really won until you've taken something off the table. i know this is a totally -- actually anything you've heard about stocks. but after what we've lived through, the dot com bust, the bank stocks, the destruction of so much old tech, the flash crashes, just sitting on all your big gains and letting them ride does seem a little foolish, doesn't it? if you can take something off the table to be sure you never turn a huge win into a loss? why am i putting so much stress on the need to unload shares?
well, for starters, you don't need me to tell you to sell your losers. when you own a stock, maybe the story isn't playing out as well as you expected, maybe the economy takes a turn for the worst, your stock belongs to a sector that's out of favor. don't give them the benefit of the doubt. just sell. better to act quickly and take a small loss than give a broken company a second chance to burn you and take a much larger loss. >> the house of pain. >> lots of people hang on to the losers often because they were once big winners or because they're waiting for them to get back to even before selling. and that is the worst kind of amateur mistake. but even then, these people know that the losers deserve to be sold. they want to sell, they're just waiting too long for an realistic price that's too high. hey, it'll get back, i know if i just wait, it's like some plant, water it, it'll eventually bloom. selling your losers seems to make perfect sense. selling your winners, that's counterintuitive. but you have to trim your
biggest gainers because of diversification. your positions can get so big, let's say you own a stock that's doubled maybe doubled again, apple, all right charitable trust bought apple in the 200s, if it represented 15% of your portfolio, then goes up huge, now it's going to represent a much larger piece of the pie even if the other stocks you own have also gone up a decent amount. at that point, you have too much exposure to a single stock and too much exposure to the sector it's in. of where we bought it totally because of discipline. we weren't clairvoyant about what was going to happen at apple, we believed in apple passionately, but discipline trumps conviction in cramerica. you never want more than 20% of your portfolio in an individual sector because keeping your eggs in one basket is dopey. apple at the high got too big of a position for actionsalertplus.com. we did trim it by necessity. as is often the case, necessity was the mother of invention and the mother of profits. that's why you need to trim your winners as they go higher so
they don't become too large of piece of your portfolio and get you in trouble. now if you're investing in the long-term, you have time to do this gradually. you should sell off parts of your position. scaling out slowly over time. like i told you earlier, never sell all at once, like you should never buy at once. try to wait for moments of strength to get better prices. don't wait too long, you don't want your portfolio to become too heavily weighted toward one group. there's one more concept you should be aware of when you sell your best performers and that's the idea of playing with the house's money. ♪ hallelujah which i explained in my one of my investing rules in "stay mad for life," when you own a stock with a huge multi-year run, you want to trim your position where the money you've invested in the stock comes from profits you've already made. and not a penny comes from your original investment. once you pare back your winners, you can afford to take far more risks with what's left. you can let that run forever, i
don't care. you can't lose. you can ride it all you want and never let it go if that's what you'd like. it's bought and paid for by the house's money. oh, one last thing, younger investors can let their gains run for longer than older investors. we're too late in the game. when you're young, it's less important that you preserve your capital because you've got your whole working life to make it up in your regular job! those of us in the older demographic, even if you're extraordinarily well preserved like myself, who would've guessed i'm a limber 60-something? you've got to be more careful. that means trimming your winners more aggressively and ringing the register more regularly than any young investor might do. here's the bottom line, you can't just hold stocks forever. you've got to remember to take profits, trim back winners so your portfolio stays diversified. and try to take your invested capital out and play with the house's money. >> the house of pleasure. >> i needed to speak to skip in
texas. skip? >> caller: hey, this is skip. >> hey, skip. >> caller: whenever callers ask about your preference for buying gold, they say your preference is for gold coins, followed by bullion and then stocks. >> yes. >> caller: why do you favor coins the most? and two, which coins are best? or does it matter? >> no, doesn't matter which. i prefer coins because you can store them very easily in your safety deposit box, they're very easy to have. the gold stocks have been horrendous, they're a terrible -- they're not correlating with gold at all. they're a huge mistake. let's go to samantha in new york. samantha? >> caller: hi, jim, i'm so excited to talk to you. big brooklyn boo-yah for you. >> i'll give you a boo-yah for you. >> caller: i'm 22, but my job doesn't offer any type of retirement account, i want to start investing myself with a little money i have. >> i think that sounds great. >> caller: do i start investing with speculative stocks because i'm young enough to lose it?
>> you're only 22, which is just a terrific time to start investing. and i want you to mix it up, but i also want you for 20% of your capital, but for 80% of your capital, i want a dividend, some bull work names. i'll bless 20%, if you tell me you've got great specks, i'm willing to take up to 30% because you've got your whole life to make it back. and congratulations for being 22 and wanting to invest. that's how you get really wealthy. we take lessons wherever we can find them. even from stock seer kenny loggins. you've got to know when to hold them, fold them and -- >> sell, sell, sell. taking control of your financial destiny is smart, but why would you go it alone? >> something with a much larger bearing on you in the stock market as a whole. >> let cramer be your guide, your sounding board. >> i'm having a hard time with my favorite stock. >> i know you can beat these professionals. >> and your coach on the road to
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>> you constantly have the courage and tenacity to fight for us. >> cramer gets going. >> you're an honest man with guts, it's a rare species. >> thanks for teaching me and putting me in charge of my own future. >> it's time to take charge of yours. >> "mad money" with jim cramer. cnbc. ♪ if you want to invest for the long-term, then like it or not, it means planning for retirement. to misquote in the long run, we all retire. i know it may not sound sexy, but trying to put together enough money to be financially independent, that's what this game is all about. i'm sure you've heard the basics of retirement planning, you've got to contribute to your 401(k) plan if you have one and you have to contribute to your individual retirement account or i.r.a. and that's conventional wisdom and that time it's actually right. it's helpful. instead of telling you to park money in your i.r.a., i'm going to give you suggestions of what
kind of stocks you should buy with your retirement cash. you need to know why everyone tells you to fund your i.r.a. because these are tax blessed vehicles. it comes from your pre-tax income and don't pay taxes on the money you contribute. even better. while your money stays in these accounts, you pay no taxes on your profits, no capital gains tax, that's compound for free. for years, tax free gives you much larger returns over decades and decades. you only pay taxes when the money is withdrawn and then it's taxed as regular income just the once. that's a sweet deal. especially if you're worried justly about tax rates on dividends or capital gains going higher. a lot of people trying to front run the change in tax law at the end of the fiscal cliff thing. many people were worried about it. however, as much as i like the tax favored status of 401(k) plans, i.r.a.s, i've got to tell you something about it that most won't say. most company plans stink. they have high management fees and administrative costs that
eat into your returns, particularly when they're very low. and worst of all, they offer you lousy choices for investments. the 401(k) business is a racket for the managers who get to charge you these fees. i can't believe i said that because it's true. ideally when you're managing your own money, you want to diversify the portfolio and pick up the five to ten stocks, most don't even let you do that, mine doesn't. often they only let you choose between no more than a couple dozen different mutual funds. that's fine for me. but i'd like to have a little more variety. some stock funds, some bond funds, that's all they offer. the best you can do is find a decent low cost index fund. put the 401(k) money in there. given that the whole premise of "mad money" is you can do better by picking stocks and managing portfolio on your own, that makes the 401(k) a poorly designed vehicle for "mad money." sometimes it feels it was set up to benefit the financial service industry, not you. and given the way washington works, i wouldn't be surprised if that was actually the case.
hey, come on, call them like i see it. nevertheless, as much as most 401(k) plans stink, you should still contribute to your 401(k) if you have one. in order to take advantage of the tax blessed nature, these tax favored vehicles are too good to pass up. plus many will match your contributions. and i'm a big believer in never turning down free money. so when you're saving for retirement, the first thing you should do is put enough money to max out the company match if you have one and then stop. then the rest of your retirement investment should happen in your i.r.a. until you hit the upper limit of what you're allowed to contribute in a given year. an i.r.a. gives you the freedom to invest whatever way you want. and yes, you can do both, you're allowed to do. what should you buy in your i.r.a. like i tell you in "getting back to even," your best bet here is to own high-yielding dividend stocks that provide protection and generate income. but there are a couple of wrinkles that make investing in i.r.a. different. you don't want to buy master limited partnerships.
think the pipeline stocks, the reason, mlps are already tax advantaged as the distributions are return of capital. which means you don't pay taxes on them until you sell the stock. but thank to an arcane tax rule if you buy too many of these stocks within a retirement account, you could actually end up giving that tax -- giving up that tax-favored status and paying the i.r.s. taxes that you wouldn't have paid if you'd simply bought them in a regular brokerage account. it's too hard, too many people said, jim, it's too hard. the same rule, by the way, can hit you with certain real estate investment trusts. but in general, reits tend to have higher yields and worth owning in your i.r.a. please be careful of the mortgage reits. consult your tax professional because that's all about the individual. beyond that, you need to use the same metrics, you're looking for high-yielding stocks but the dividend needs to be safe. the company better have enough earnings to cover the payout. we like companies with
consistent track record of raising their dividends. even as they might seem sleevy versus the go-go stocks, cause a hole in your investing plans. don't be afraid of owning boring old utilities, they've made you money over the long-term if you took the dividends and reinvested them right back into the same stocks that paid them. here's the bottom line, a huge part of long-term investing is retirement investing and the best way to prepare for your retirement is by putting money in a tax-favored vehicle like an i.r.a. account and investing it in high-yielding dividend stocks. the idea is to reinvest your dividends let them compound year after year after year until you withdraw your money at the end. that's a terrific recipe for producing huge long-term returns. i can't believe people don't have an i.r.a. or 401(k), that's plain wrong. stick with cramer. 1,000 points in a few minutes. >> machines gone wild. >> never in history have there been more doubts about this
market. >> it was a rough opening day. >> feel like the odds are stacked against you? some people feel the game is not worth playing, but i know together we can win. >> jim cramer leveling the playing field for all. >> i'm not walking away from this market and you shouldn't either. huddle up, cramerica. >> "mad money" kicks off weeknights. ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good.
when it's too hot to sleep, "mad money" 11:00 p.m. weeknights. here's a serious conundrum, how on earth are you supposed to pick stocks for the long haul when they're going in and out of style on the wall street fashion show? how do you buy something to rack up multi-year gains when that's not the way this game works most of the time. there are few stocks that you can keep riding higher and higher year after year. but when you find them, they are the holy grail of investing and they almost never go out of vogue. stick with that fashion show analogy. like i told you before, there is no such thing as a stock you can
own forever. that's the essence of the kind of buy and hold thinking that's lost so many people so many huge sums over so long. >> sell, sell, sell! >> the house of pain. >> but some winners are more lasting than others and certain type of stock that can produce incredible multi-year gains and they can be owned for much longer than ordinary stocks. i'm talking about secular growth stocks, a rare breed that you should always be on the lookout for. these companies are driven by powerful long-term stories that transcend the strength or weakness of the underlying economy. most companies need a healthy economy in order to thrive. we call those cyclical stocks. but a true secular growth story can deliver fantastic numbers even in a lousy economy. numbers so consistently good that they can keep powering the stock higher. how do you spot a growth name? i like to look at big picture themes where you have a company that's a play on a much broader trend. take the move toward healthier eating in this country. this organic theme has made whole foods the go-to
supermarket for all things healthy and organic and a power house stock that will last for years and years. same goes for haines celestial, also for companies that harness the internet, like netflix, amazon, of course, google. of these, i think goggle has the most staying power because it is the most earning power. google's got social, mobile, cloud. that's the holy trinity of secular growth. and i don't see that diminishing any time soon. however, while these stories can last for years, even secular growth trends do have at one point a limited shelf life. and you can see there are fewer and fewer plays that can consistently make you money. years ago back when the smartphone was a relative recent invention. i started talking about the power of the internet. and for a while, there's a lot of money to be made all over the smartphone food chain. you can buy both best of breed, second and third. but in the end, no the the best of the best. apple can thrive when the theme runs out of gas. the fact that apple could go
down and go down hard is a reminder that nothing can last forever. and a recognition that something was once a secular grower may have become much more hostage to worldwide economies. hey, listen, pcs used to be secular growers. it's not just tech, though, in my formative years when it came to growth stocks, nothing could compare to merck, pfizer and lily, they were machines. fast forward 20 years and with innovation dwindling, they've become like utilities in the growth characteristics. they are con-ed. they've become bond market equivalents, a rising tide does not lift all ships, the ones with holes in them still sink and a lowering tide enlists nothing. here's the bottom line, most of the time you can't hang on to stocks for years and years, but if you find something driven by the same theme that's been pushing up a whole foods or google, there's nothing wrong with owning the super high
quality stocks for as long as they're intact. and that can be for a long time, but secular growth doesn't last forever. and while you may want to go for the greatest secular of all time, only homework will keep you from crashing along with it. jason in maryland. jason? >> caller: hello, how are you? >> i'm fine, jason. how about you? >> caller: i'm hanging in there. i was just wondering about small, mid and large cap investments. what are the benefits and cons of each one? >> well, large cap often includes the fact it might have a good balance sheet big dividend and that means it's got cushion and you can reinvest dividends over time. mid cap may mean more hit or miss. may not be able to withstand the large cap issues. they have benefits over mid caps. small caps are speculative, they may hit the ball out of the park or may strike out. i consider those to be strikeout/home run plays. diamonds may be forever, but stocks are not.
you must stay disciplined and do homework to survive. stay with cramer. build your future. >> happy boo-yah to ya. thank you not just for the money, jim, but the money translates into, in my case, a college education for my son. >> boo-yah, thanks a lot for your passion for stocks. "mad money" does work for the small investor like me. >> how many other shows have kids calling in and saying boo-yah? >> "mad money" with jim cramer weeknights 6:00 and 11:00 p.m. eastern only on cnbc. ♪
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what's your policy? jim cramer, you're one of my heroes. >> i look forward to your show every weeknight. >> thank you so much helping beginning investors like me. >> when you talk about the markets, i believe you're spot on. >> oh, i love it, thank you so much every night we watch you, i have learned and earned. all night i've been trying to walk you through what it does and doesn't mean to be a good long-term investor. so while we're on the subject, i've got one last point i need to make. and it's this, there's nothing virtuous about long-term investing. the notion of trading has become a really loaded and dirty word and it shouldn't be. it mean, it is loaded with negativity. is it somehow immoral to flit in
in and out of stocks for short-term gain. and that's silly. i think picking long-term winners is more lucrative than short-term gaming stock moves and it's an easier strategy to duplicate at home because you're working during the day. but if you find your portfolio does better when you're managing your money more actively, meaning trading in and out of stocks, the more power to you. i'm not judging you, although never forget, you do not have the horses to compete with those high-frequency bandits or the hedge funds with multimillion dollar research budgets to support their trading operations. at the end of the day, when you go to the bank, you know something, they don't care if you made your money at short-term trades or long-term investments. we've seen banks launder drug money from mexican cartels, despite them, they're not going to draw the line at money you made from trading stocks. the teller presuming you can find a human isn't going to say, hey, you know, look, i'm sorry i can't accept this deposit. no, not that way, this money, no, it's dirty money from trading. take that somewhere else. that conversation's never
occurred. money's money. the only money really worth making is the kind that comes from stayed, boring investing. the only difference between trading and investing has to do with your time horizon. trades are positions you want for a short period of time, weeks or months, and investments are positions you plan on being in for the longer, year, year and a half counts as long on this show. don't be fooled by the false dichotomy between trading and investing. you don't have to choose between passively sitting on your holdings even when you feel like you should be taking action. you can do both. you can do either. or you can find a happy medium. no matter which path you choose or both, be true to your disciplines, do your homework, stay on top of things and i bet you'll do better than about any mutual fund or etf you could possibly at your disposal. only those who are trying to manage money for themselves and their many minions would disagree. stick with cramer. you've done your homework,
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long-term investing. no, no, no, it's not a way to be able to say i don't have to care. you should care even more. there's a bull market somewhere, i promise to try to will see yo! and good evening, everybody. or good afternoon if you're out west. this is "the kudlow report." i am brian sullivan. don't worry, larry will be back tomorrow night. and i quote, monetary policy for the foreseeable future is what is needed, end quote. that's what ben bernanke said a few hours ago in a speech. after what was a flat day for the major markets, are traders reading this right and does the fed even matter anymore? the big action was in the oil market. crude oil in the $106