Jim Cramers 25 rules for investing
Link: http://www.thestreet.com/tsc/cramerbook
I have incorporated these rules into my investing methods. I have never lost money investing...
[h2]Rule 1:
Bulls, Bears Make Money, Pigs Get Slaughtered[/h2]
It's essential for all traders to know when to take some off the table.
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[h2]Rule 2:
It's OK to Pay the Taxes[/h2]
Stop fearing the tax man and start fearing the loss man because gains can be fleeting.
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[h2]Rule 3:
Don't Buy All at Once[/h2]
To maximize your profits, stage your buys, work your orders and try to get the best price over time.
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[h2]Rule 4:
Buy Damaged Stocks, Not Damaged Companies[/h2]
There are no refunds on Wall Street, so do your research and focus your trades on damaged stocks rather than companies.
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[h2]Rule 5:
Diversify to Control Risk[/h2]
If you control the downside and diversify your holdings, the upside will take care of itself.
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[h2]Rule 6:
Do Your Stock Homework[/h2]
Before you buy any stock, it's important to research all aspects of the company.
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[h2]Rule 7:
No One Made a Dime by Panicking[/h2]
There will always be a better time to leave the table, so it is best to avoid the fleeing masses.
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[h2]Rule 8:
Buy Best-of-Breed Companies[/h2]
Investing in the more expensive stock is invariably worth it because you get piece of mind.
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[h2]Rule 9:
Defend Some Stocks, Not All[/h2]
When trading gets tough, pick your favorite stocks and defend only those.
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[h2]Rule 10:
Bad Buys Won't Become Takeovers[/h2]
Bad companies never get bids, so it's the good fundamentals you need to focus on.
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[h2]Rule 11:
Don't Own Too Many Names[/h2]
It can be constraining, but it's better to have a few positions you know well and like.
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[h2]Rule 12:
Cash Is for Winners[/h2]
If you don't like the market or have anything compelling to buy, it's never wrong to go with cash.
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[h2]Rule 13:
No Woulda, Shoulda, Couldas[/h2]
This damaging emotion is destructive to the positive mindset needed to make investment decisions.
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[h2]Rule 14:
Expect, Don't Fear Corrections[/h2]
It is not always clear when a correction will strike, so expect and be prepared for one at all times.
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[h2]Rule 15:
Don't Forget Bonds[/h2]
It's important to watch more than stocks, and bonds are stocks' direct competition.
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[h2]Rule 16:
Never Subsidize Losers With Winners[/h2]
Any trader stuck in this position would do well to sell sinking stocks and wait a day.
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[h2]Rule 17:
Check Hope at the Door[/h2]
Hope is emotion, pure and simple, and trading is not a game of emotion.
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[h2]Rule 18:
Be Flexible[/h2]
Recognize and be open to the unexpected shifts in the market because business, by nature, is dynamic, not static.
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[h2]Rule 19:
When the Chiefs Retreat, So Should You[/h2]
High-level executives don't quit a company for personal reasons, so that is a sign something is wrong.
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[h2]Rule 20:
Giving Up on Value Is a Sin[/h2]
If you don't have patience, think about letting someone who does run your money.
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[h2]Rule 21:
Be a TV Critic[/h2]
Accept that what you hear on television is probably right, but no more than that.
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[h2]Rule 22:
Wait 30 Days After Preannouncements[/h2]
Preannouncements signal ongoing weakness, wait 30 days to see if anything has gotten better before you pull the trigger to buy.
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[h2]Rule 23:
Beware of Wall Street Hype[/h2]
Never underestimate the promotion machine because analysts get behind stocks and can keep them propelled in an up direction well beyond reason.
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[h2]Rule 24:
Explain Your Picks[/h2]
Buying stocks is a solitary event, too solitary in fact, so always make sure you can articulate your reasoning to someone else.
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[h2]Rule 25:
There's Always a Bull Market[/h2]
It's OK if you have to work hard to find it, just don't default to what's in bear mode because you are time-constrained or intellectually lazy.
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