and welcome to my world. you need to get in the game. go out of business. and he's nuts! they're nuts! they know nothing. i always like to say there's a bull market somewhere. "mad money," you can't afford to miss it. hey, i'm cramer. welcome to cramerica. welcome to "mad money." other people want to make friends. i just want to make you some money! because my job's not just to entertain you, but to educate me. so call me at 1-800-743-cnbc. tonight, i've decided, out of the kindness of my heart, to charitably to teach you some of the things that you don't know, if you haven't bought my new book, "jim cramer's stay mad for

life, get rich, stay rich, and make your kids even richer." if you still don't have a copy, would you allow me a moment or two of shameless self-promotion? after all, you're getting to hear some of the content in "stay mad for life" for free tonight. this is many of the book that many of you have been waiting for. the one where i finally talk about a whole lot more than just stocks. there's plenty of stock stuff in here. but tonight's show is based on some of my new rules for investing. and not only do i have new rules for investing, this book also has a list of my 20 favorite stocks for the near term. along with a rigorous, in-depth study of mutual funds, at last! that produced what i believe are the 11 best funds to be in, as long as their managers stay put. this book is about more than stocks. it is, in fact, the definitive guide to personal finance. the one that teaches you how to

make mad money, written not by somebody who has only ever made money by writing books, but by someone who really did it by investing. ♪ hallelujuah all right, all right, enough with the total self-promotion, shamelessness, now i'll teach you how to invest like a pro. let me tell you what i believe. i believe that individual investors, amateurs who run their own money in their spare time, can make more money in the market than the professionals. those who run money as their full-time job. and have trained often for decades to become better investors. i believe that you prime-time home gamers have the resources, the brains, and the opportunities to make yourselves really and truly rich and to stay that way by investing in stocks. but i also know that most individual amateur investors will never come close to that

achievement. why? well, the list is endless! but right at the top are the mistakes that professional investors don't make. and ordinary investors make constantly. not only for pros who aren't too proud to learn. hey, our greatest moment was when carl ichan told us he was watching. but also for amateurs who want to invest like pros. >> alaboard! >> i say amateurs in aet total nonderoger to way, meaning people have real jobs and also invest! so i want to bridge the goal between how professionals run their money and how amateurs do it. there are a lot of basic things that i was taught while they were training me at goldman sachs, and few people get the benefit of that kind of education. plus, in the 20 years since i started mire own hedge fund, i have not stopped learning for a moment. and tonight it's all about

imparting what i've learned to all of you home gamers. >> the house of pleasure! >> you need to learn how to avoid making the amateur mistakes that professionals rarely fall prey to. it's my job to teach you. because i want to see ordinary part-time investors win big. i'll tell you the things that the pros are doing right. and you could be doing wrong. >> no, no, in! >> tonight i'm going to tell you how to avoid making five mistakes amateurs make and pros don't, because learning how to invest well is much more important than getting advice about individual stocks or even sectors, groups of stocks. as long as you're trading like an amateur -- and everyone who trades part-time deserves to be called an amateur. none of my stock picks will be able to rescue you from the fact that you haven't been taught any of this stuff. first lesson, from what i've seen, amateurs are almost always, totally fully invested.

they've all backed up the truck at all times, all the money in their portfolios is invested in stock and no cash is left on the side. pros always have cash in their portfolios. they never run out of cash. you always want to have cash. this is one of the most alien and difficult concepts for most ordinary investors to understand. nonprofessionals think it's right to be fully invested. i'm a champion of stocks, you know that. but that's totally, 100% wrong to be fully invested. if you learned nothing else from the show, let it be that. this is a lesson i've had to learn through painful experience. because when you're out of cash, you're up the creek without a paddle. >> the house of pain! >> when i run my charitable trust i always, always, always make sure to have some cash around. loose change call it.

in fact, when i find myself with only a 5% position in cash, 5% of my portfolio that's on the sidelines, i consider that running on empty. i'll get questions, usually in e-mails or on stockpicker.com, one of the best sources i think of investment ideas around. also happens to belong to thestreet.com where i'm a big shareholder and director and adviser to the ceo. i was voted the best employee three years running. i get questions from people who want to know if they should buy more of their favorite stocks. and then they tell me they're fully invested with no cash on the sidelines. you need some electroshock therapy. here's the simple rule of thumb. if you have no cash, you need to sell something, end of story. that's it. why do you absolutely need cash? you need a reserve so that you can profit from declines in the market. we will always have pullbacks, so you will always need cash.

it's there so you can take advantage of a selloff, by purchasing your favorite stocks at much lower prices. if you're fully invested, a selloff is an agonizing process. where you're losing money every second. >> no, no! >> but if you got cash, it's a great opportunity to pick up merchandise that's been marked down for a limited time only. i swear to you, once you start keeping a substantial amount of cash in your portfolio, i think 10% a is good number, you'll stop dreading declines. you'll start looking forward to them. this is why having cash on the sidelines can mean the difference between staying even with the s&p 500 every year or trouncing it with your massive outperformance. you need to consider the cash in your portfolio like it's the gas in your car. i mean, would you ever consider running your car on empty? well, don't let your portfolio run on empty either. you want to -- you want to keep your cash position, say, 10% of

your portfolio on average. when it drops to 5%, that's fully invested. once you're at 5% cash, there's only one circumstance where it's right to use that cash to buy stocks. when the market has taken a big, big hit. i'm talking about a decline of at least 10% from the peak before the decline to the trough. only then should you put all that cash to work. the pin action off the decline is put into 5%. that way you can use the decline to pull out your shopping list, or maybe it's more like the list you're supposed to keep of movies you want to rent. because when you get to the video store, you can never remember. it's the list of stocks you want to buy and the prices you're willing to pay for them. and pick up your favorite pieces of stock merchandise on the cheap. that 5% cash, that's the reserve. that's there to prepare for these truly massive declines. and if you use it for anything else, you'll regret it the next time the market tanks. hey, the pros, they know all this. they keep cash on the sidelines

routinely. now, you know it, too. the bottom line? pros always have cash on the sidelines. amateurs, they never have cash. that's what makes it so scary. i need you to invest like a pro. take some calls. let's go to bruce in california. bruce? >> caller: booyah from san francisco state university college of business, where i'm a professor. >> how fabulous. we got the professor calling in. how can i teach the professor? >> caller: jim, following your advice, i have some cash lying around from schnitzeling on the way up. >> smart. >> caller: i even cashed at or near the top on some of my stocks. my question, how much cash should i keep on hand when the market is flying high versus not so great? >> toughest question in the world, because what i hear from people is, jim, you're keeping me out of the mojo. why are you keeping me on the sidelines? and the answer, bruce, is this, we're going to use common sense. bulls make money.

bears make money. hogs get slaughtered. i want you to take it so that when you have things are up huge, you're playing with the house's money. does it lead to maybe, 20%, 30%, 40% cash? i don't care. common sense. we don't give back gains. we let them run. but we take stuff off as it goes off as we find ourselves overinvested, god love us, we've made so much money, it's fantastic. dave in california, dave? >> caller: hello, jim, a warm southern california booyah to you. >> how about a southland booyah. what's up? >> caller: jim, i like to be as fully invested in the market as i can. but i always keep cash on hand so i'm able to buy when opportunities present themselves. >> all right. >> caller: tell me, jim, does the cash percentage in our portfolios vary depending on our risk tolerance and how so? >> i like that. i like that. it augments what i've been saying in this segment. the truth is that i'm using kind of a broad rubric, 10% being the amount of money that i would

keep in cash because i have such a hard problem trying to even keep anybody in some cash. like, yes, if you are risk averse, don't try to hedge. don't buy the puts. just take some off. a 30% cash position. sometimes at my hedge fund, i had 50% -- i don't anymore. a 50% cash position. sometimes i was totally out of the market. it's fine to be risk averse. it's not 99 to lose money. tina in arkansas, please. tina? >> caller: jim cramer, how about a little tiny podunk town booyah from l.a.? that's lower arkansas, jim. >> i tell you something, how about a sticks booyah? what's up? >> caller: wonderful, wonderful. listen, cramer, don't you dare get that pillow out. bear with me, i got a couple of things to tell you about. >> i can't bring out the "mad money" blanket? >> caller: don't you dare, jim. >> you correctly identified where i was going. go ahead. >> caller: i read all your books and i never missed an episode of

your show since you started. >> you are terrific, thank you. >> caller: i got to tell you if i sent in all the pages for you and your staff to guarantee how much money you'd made us, i guarantee you, you'd never have the time. >> thank you for sharing that with the audience. always trying to figure out the value of the show. thank you. >> caller: listen, jim, i'm fortunate enough that i don't have to work a job. so, i eat and breathe and live the stock market. >> i'm on the same diet. >> caller: there you are. my problem is, jim, i tend to keep rat holing a lot of my profits. i just tend to let them pile up. so, my question is when the market is good, jim, should i double up on the amount of stock i'm buying until i utilize all my cash all the time? >> tina, i know how tempting that it is. i know how tempting that is. but you know what, when the market is very good, we're often given 3% to 5% pullbacks. if you are letting it run, what happens, you are paralyzed.

deer in the head lights. no, we keep taking cash off. we expect the market is going to pull back, even in the greatet bull markets in the world you get the 3% to 5%, that's how you outperform. you will beat all the money managers with the cash. believe me, it sounded counterintuitive. believe me. invest like a pro, not an amateur. cash on the sidelines is king. and stay with cramer. want to get in on the action? send jim an e-mail to madmoney@cnbc.com. give us a call at 1-81-800-743-c or check us out online at madmoney.cnbc.com. he ran off with his secretary! she's 23 years old! - oh, come on. - enough! you get half. and you get half.

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tonight i'm teaching you how to avoid the mistakes that are made by most amateur investors. people who run their own money on the side and have real jobs, as opposed to people who run money for a living. i'm teaching you how to trade like a professional instead. you know what, also how to invest. the best thing i can do is teach

you how to invest like a professional and to stop making the kinds of mistakes that you'll almost never be helped with when you invest by your lonesome. i told you about keeping cash already on the sidelines, right? we got that down. now it's time to look at a crucial difference in how professionals and amateurs think about stocks. the professionals, all right, and the amateurs! when an amateur look as the a stock, he thinks, what's my upside? pros don't do that. they think, what's my downside! if you take care of the downside, the upside often takes care of itself. that means you need to spend a lot more time considering what you can lose in the stock then you can start thinking about what you can gain. i can't tell you how many times someone who owns a stock that's going down asks me how this is possible, in spite of all the great reasons to own it. they've totally failed to consider the possibility that there might be any downside to

the stock. the fact is, you have to expect your stocks to go lower sometimes. and instead of clinging to your bullish case for owning a stock, it's important that you consider the potential downside. and what protections are in place. >> no, no! >> i can't have that be you. whenever i meet or talk to nonprofessional investors -- and i do it all the time on the street, in the supermarket, walking from -- from my office to the car, whatever, they always want my opinion on how high their stocks can run. they want to know that upside. every time this happens, i turn the tables and i ask them, how much do you think this stock can go down? >> the house of pain! >> they're here. >> the house of pleasure. >> the house of pain. >> people want don't want to know that. they just want to know how much it can go up. or they want to tell me how much they think it can go up. no amateur investor ever wants to hear about the downside. they don't even think their stocks will ever go down from the moment they buy them.

they pull the trigger, and it's supposed to be nothing but up. because i'm a professional, i know that everything will go down eventually, and i do mean everything. once you expect that some your stocks will have declines, you can start thinking about your downside protection. your stock starts going down, you want to know what can cushion the fall. a company with a big buyback is a company with a big cushion. because you know that company will be out there buying shares, standing underneath in the open market during any declines. you know there will always be a buyer for the stock. boy, the professionals love that. they love it, because it limits their downside. how about dividends? that's why they're important, too. we don't like dividends for the income they provide. not that we don't appreciate the income. we like dividends because they create yield support. that limits how much a stock can go down. as a stock sinks, its dividend yield goes higher.

because the yield is just the actual amount of the dividend. so, say the company pays out a dollar a year, divided by the share price. since we know our stocks will go down at some point, it's good to have stocks with dividends that become more and more attractive. see, they draw in new investors as the stocks go down. you'll be thinking this, right? the guy who doesn't own the stock is thinking this. you want to make sure the dividend, of course, is secure. meaning that the company can afford to keep paying it out. you want to know if the dividend can be increased, and if the company has a history of dividend increases. boy, we love those in cramerica. these assist your upside. but the reason to be attracted to strong, increasing dividends, they limit your downside. and your downside is what you have to be thinking about at all times. that's what the pros do. if you want to buy a stock, of course, you know the bull case for it. you know why the stock deserves to go higher. you got a thesis about how that will actually happen.

there's no reason to think about upside beyond that, though. plenty of stocks have great, great upside potential, but far fewer have great downside protection. and it's always the downside that we focus on here. every piece i do, every night when i come out, i'm thinking downside, downside, down side. you should always be vigilant for stocks with double-digit growth rates that sell at single-digit multiples and have big buybacks and dividends. holy grail, what we're looking for. the cheap price along with the dividend buyback are the downside protections. those are the stocks i love to focus over and over again on the show. all the major oil companies were in that exact same position. double-digit growth, single-digit multiples with big buybacks and big dividends before and during the remarkable runs of the last decades, and they always will be on pullbacks. think about it. stocks with limited downside created tons of adherence, and the stocks take care of themselves. bottom line, if you want to

invest like a pro, stop focusing on how a stock can make you money and start thinking about whether or not it can lose you a lot of money! and stick with cramer. i get the question "does it work?" all the time, and you know what, it works. nutrisystem for men: flexible new programs personalized to meet your goals. what's great about nutrisystem is you eat the foods you love and you lose weight.

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tonight's show is all about

teaching you to invest like a pro. see, there are all these money-losing mistakes that people who don't invest for a living routinely make when they try to manage their money. it's my job to help you avoid them. best way to do that is to teach. i love teaching in cramerica. the one thing that professional investors have that home gamers lack is a truly rigorous structured education about the market. now, of course, there are obviously plenty of individual investors who have learned and an immense amount about managing their own money. and they do trade like pros. the problem is that most individual investors really don't have the time to become great self-taught investors. kind of makes sense, right? and do you know what, if you're one of these people, you shouldn't have to spend an eternity getting an education about stocks. especially not when you've probably got a full-time job, being an auto didact, s.a.t.

word of the millennium. being a self-taught pro is too much effort. and it's not necessary. it's why you come to "mad money." we've been through two valuable lessons already. you must always have some cash. and you must concentrate on the downside. >> no, no! >> when you look at stocks, so you can find investments that don't have a lot of it. you know, we take inspiration from anywhere we can find it on "mad money." even not quite classic '70s action films, which is why lesson number three comes from "magnum force" starring clint eastwood. my third favorite actor after gene hackman, and steven segal. in the immortal words of clint, a man's go to know his own limitations. how does this translate to investing? pros try not to invest in things they don't know or understand. amateurs do this all of the time. it never ends well.

there's a technical question i've gotten used to, because i get it often from viewers or users of stockpickers.com's answer section where i try to answer questions from people around the clock. this question can be about many different stocks, many different kinds of stocks, but all these stocks have one thing in common. they are beyond my ken. i don't understand them. i recognize that certain stocks are not my strength whenever i get a question about some particularly complicated stock that i just don't know well. and, look, i am a generalist who takes pride in knowing more stocks than anyone else in the universe. but there are still plenty of businesses that i just can't fathom. i ain't whipping myself about it. i just don't know them. if i can admit it, maybe you should be able to, too. many amateur investors are just dying to own stocks of companies they really don't understand in the least. if you cannot explain what a company does and how it makes

its money without quoting some jargon that only an information technology expert would understand, nope! >> sell, sell, sell! >> don't buy. don't buy. >> then you shouldn't buy it. tremendous number of tech stocks are in this category. so, too, are a lot of biotech stocks. we hear them on the "lightning round" every day, right? but, really, it can be any business that you're not familiar with. people are always asking me about commodities. how about corn? what do you think of soy? i don't know enough about trading commodities to give a good answer. i don't! sometimes i have a view on oil futures, but that's really about it. i recognize that i just don't know enough and that i don't have the time to learn. so, i do one of the smartest things any investor can do, i take a pass. ♪ hallelujuah there are thousands of stocks you can buy in this country, so why on earth should you invest in the stocks you don't understand? it might be a sizzling stock.

but if you don't know enough, you're pretty much flying blind. how do you know when to buy or sell a stock in a company you don't understand? if you listen to the conference call and come away more confused than enlightened, how on earth are you supposed to know if it was a good call or a bad one? you can't tell this from this. there will be plenty of businesses and plenty of stocks that you do understand. buy those! >> don't buy. don't buy. >> the best thing you can do is look the other way. pros will pass on stocks all the time. because it's better to admit you don't know something. and then move on to try and learn the ins and outs of a business that makes sense to you. something you understand. and then you just avoid the stuff you don't.

look do you know what i've made the mistake on the show in the segments i prepare ahead of time and i pay for it. i'm sure some of you have. i recommended one of the companies made out of jargon, called tessara. it was in the miniaturizations methods business, which is something to do with making semiconductors small. i thought i knew something about it. i thought i felt good about it. all i was able to do is to tell a story about it. i never should have gotten behind the business. the week i gave it a thumbs-up, it lost 20% on its value on some news that frankly i didn't understand well. this was one where it seemed like it was okay. it was some piece of technology that just too hard to know unless you were actually using it as a client. not only is it okay to take a pass, it's necessary if you don't want to lose money hand over visit. the bottom line, listen to your

inner clint eastwood, and, remember, a man's got to know his own limitations. time for you to get in touch with yours. hope in pennsylvania, hope? >> caller: good morning, booyah, jim, from -- how are you? >> hey, man. good to have you. good to have you on the show. >> caller: i must tell you all your fans in cramerica are appreciative that you take your time in your life to help us. in fact, my daughter hasn't stopped raving. bloomingtons was s was so pac might have to -- >> i enjoy it. indeed sometimes i get carried away. somebody should whack me. >> caller: that's the energy we love. >> it's fine. what's on your mind? >> caller: you're always saying after-hours trading is for the pros. and my questions are, what is it that makes after-hours trading so difficult, and is it

different from the normal business hours? or is it a different trading system? and who are the ones that trade before the market opens and closes? because i'm guessing only institutionals or mutual funds? >> i think a lot of people trade before the market opens based on what's going on in europe. you can take a look at europe. you can see that they're taking up all the software stocks. you might go into a big trading desk and say, look, i want to buy $25,000 shares of microsoft because you see that group going up or 25,000 shares of intel because they've recommended some european semiconductors. after the bell it's really a pickoff zone. i've always felt that that was the wild west. typically someone might be watching my show, get too excited on a stock that i like, and they'll be someone on the other side who is not as excited, very cool and calculated, who will sell that stock to you. people, professionals, stay in their offices because of the show, and wait for an

unsuspecting amateur investor to come in and take a stock up. and then they hit them! which is why i always say, no after-hours trading. can i have new jersey, please? >> caller: booyah, jim. >> booyah, chief. >> caller: hey, you've always been a very successful growth investor. do you think with the uncertainty in the current market we should take a long, hard look at value investing? >> let's step back. i appreciate the notion that i'm considered to be a good growth investor. i will also tell you that i like to be well rounded. i am looking for any stock and any edge that i can find for you. if i find a good value stock, i'm going to share it with you. if i find a good growth stock, i'm going to share it with you. yes, i have a penchant for growth, but when we see undervaluation, we'll point it out, because there are many, many ways to make money in cramerica. remember, pros know their own limitations. you need to invest in stuff you understand. and avoid stuff you don't know.

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tonight i'm telling you all about what separates the men from the boys. the wheat from the chaff. the dross from the gold. and every other cliche i've got. most importantly, the professional investor from the amateur. so far we've been over three big mistakes to avoid if you want to invest like a pro. now i'm giving you the fourth. amateurs always worry that they aren't making enough money. i'm going to repeat that again. amateurs say, i got to make more! but pros worry they're making too much money! i know. some of you sat forward just now. some of you bolted up. cramer's lost his mind! why would anyone worry about making too much money? it even sounds ridiculous to me. i mean, look, we've all been taught one thing, you can never be too thin or too rich, right? well, too thin, i'm doing my

best here. too rich, maybe. you can certainly be making too much money at one time. too quickly in the market. i got to tell you, when i was running my hedge fund, i was never more afraid when i was making money. you would think that would be my happiest, right? ♪ hallelujuah >> shouldn't i have been here? shouldn't i have been here? >> house of pleasure. >> you think making lots of money is something to celebrate, not fret over. that would be dead wrong. aha. anyone can make a ton of money for any schmo, right? all you got to do is take on way too much risk, and that is at the heart of the problem. you need to worry about making too much money, not too little. because making too much money is a sign that your whole portfolio pay be out of whack. that you're taking on way too

much risk. that this could happen in a moment's notice. >> no, no! >> and that everything could fall apart for your investments at any moment. >> the house of pain! >> way back in the late '90s, really from 1999 to 2000, there were people who were coining money daily. they were making more money than they ever dreamed in the market. hoards of regular people started investing. because it was so easy to make money. but you never hear about those people anymore, do you? they're done paying attention to the market. they're gone. they're not watching this show. and they're done trying to make money in stocks. they got blown out of the game. and that happened because these people were making too much money at once. if they'd seen that as a red flag, like the pros, then they would have known better. they might still be making a little money. not anymore. but they were encouraged by how much money they were making and

decided to raise the stakes without realizing how much risk was involved. do you know that whenever i had a streak where i was beating the market handily, when i would be gaining as much as a percent a day, if the market were only gaining a half percent, see, i knew that something was doing -- was going wrong. i had what's called too much exposure. and i had to cut back by -- >> sell, sell, sell! >> especially selling some of my biggest winners and that hurt my feelings. but you know what, it never cost any money to take the stocks that i made me money? well, except paying the brokerage fee. i never kicked myself for taking the profit. i never whipped myself even when it went higher. when it went lower i was prepped. one way to predict that your portfolio was going to implode was by realizing you are making too much money on a given day. hey, i'll let you know a big secret.

a secret to great professional money management, it's to get out when the getting's good before you blow yourself up. how can you tell? look at what you own. you killing the averages? you just slamming them? if you're making more money than you ever dreamed of making, then you are doing something very wrong. >> they know nothing! >> that's you. take profits immediately. start selling like there's no tomorrow! >> >> sell, sell, sell! >> otherwise you're setting yourself up for a huge fall. >> no, no! >> get in position for the decline for heaven sake! because the bottom line is, if you want to invest like a pro, you need to stop worrying about not making enough money and start worrying about making too much. it may be the best and only sign you get that something is about to go horribly awry in your portfolio. stick with cramer for more good advice.ma been doing the right thing. is the advice you've been getting helping or hurting? are the fees you're paying really worth it? td ameritrade's fees are fair and straight-forward.

their research is independent and unbiased. their investment consultants are knowledgeable and there when you need them. so why not talk to one? announcer: call today to schedule a free investment check-up, or visit a td ameritrade branch.

most people try to get rid of algae, and we're trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels...

that we could someday run our cars on. in using algae to form biofuels, we're not competing with the food supply. and they absorb co2, so they help solve the greenhouse problem, as well. we're making a big commitment to finding out... just how much algae can help to meet... the fuel demands of the world. this special show, i'm liking it, okay? this is because it's what separates the amateurs from the professionals. here's the last lesson i'm going to impart tonight. in many ways this is the most important one, because it's the most frequent mistake that i see. amateurs are addicted to trying to gain quarterly earnings

reports to catch the quick gain. pros learn to start living and stop worrying bet quarterly report. you -- you should never buy a stock in anticipation of a quarter. in fact, i can tell you so many ways where you should actively avoid buying right before the quarter. we can take it even further, because you're probably better off not buying during the whole earnings season in general. why? because it's just too darn hard. i can't tell you how many times i'll be asked something like, jim, what do you think of buying and then insert the stock i really like, right before the quarter. what are you hearing? what are you hearing? do you think it's going to be a good one? i always answer i like that stock, any day, but the day before the quarter. on this show, we talk about investing in stocks, trading in stocks, speculating on stocks. but there's one thing we absolutely never do with stocks and that is gamble. because when you gamble, the

house always wins and you always lose. trying to guess whether or not a stock will go higher after its earnings report, that's just pure gambling. some things are unfathomable and they really are. and this is one of them. now, i know you can't resist it. i'm begging you to resist. it's totally possible to predict that a company will come out with better-than-expected numbers, be right more often than you're wrong. although in the old days it's a lot easier because you could literally call up the cfo right before the quiet period and ask how the quarter was, and he'd tell you. it was legal back in the day. and it was a huge edge the pros had on the home gamers. but the edge is gone. even though amateurs think it lives on. when they got rid of the edge, they leveled the playing field. you may be able to predict that a company will beat the numbers, but not every company that reports a blowout, better-than-expected, unbelievably super duper quarter sees its stock go higher.

i've seen so many examples of stocks going down off of great quarters. it's told me that you cannot game the quarterly report. and the times we have done it on this show, i think we've cost you more than we've made you. so, i don't think you should buy stocks right before they report. i don't think you should buy stocks immediately after they report, either. that's another thing that's too difficult. particularly if you to it after the close of a market. to even think about doing that, you got to listen to the conference call and watch the company's numbers and all the expectations on wall street. you have to find out what the analysts are predicting and then you make a snap judgment, all this in very little time. can you do that? i find it hard myself. you can't win trying to do that. why not? because you'll have to make your judgment before the analysts community announces its judgment and before the bigtime institutional investors make their judgments and they're doing all of this at lightning speed. because on any given day in earnings season, they'll be a dozen conference calls that

these people just have to listen to, they're interested in. and they're all happening at the same time. they'll be going so fast, it's just mesmerizing. i don't care how dedicated you are, how smart you are, how plugged in you are, this kind of amazing, rapid-fire moment, does not lend itself to smart thinking. in fact, it's totally antithetical to my philosophy of buy and homework! ♪ hallelujuah you shouldn't be making snap decisions about stocks. you should be making well-considered decisions that take a lot longer. because that's how you really make the big money. dare i say it? the "mad money." it's how you stay mad for life. and can we just forget specific stocks for a minute? forget earnings season in general. the four delightful times each year when all these companies report at once is definitely the worst possible time to buy stocks. i've proved it to myself.

i actually sat down and looked at the time periods when companies reported and measured how their stocks did in those periods and how easy or hard it would be to game them. and then i did the same for the periods of times when companies weren't reporting. it was my own work. it took forever. and do you know what i found? the three weeks after the end of every quarter, those are the four times a year the companies report, are almost always the time periods where it's the least, least ability to be able to make money. it's also the period when you lost the most money. i ran the numbers. i proved it. why does this happen? because earnings season is when people make bad rush decisions. they can't step away from the battlefield. not all the pros even know this. i mean, i've seen many pros blow up on this. the best money managers along with the professionals have chosen simply not to buy during this period. >> don't buy, don't buy, don't buy. >> instead they see the news and retreat to their offices and

watch how everyone else reacts. the true pros want to take in all the information at their own time with no pressure, because pressure is the mother of all bad decisions. amateurs constantly pressure themselves. that isn't the time to do the work. if you want to invest like a pro, you must remove the pressure and work like a pro and make decisions at your own pace, when there's peace. will it cost you occasion rally not to get in front of a good quarter? of course. we do the game plan on friday and stick our necks out. we try to stay as informed as possible but it can be very difficult. much better to do the work on the quarter and watch and listen and pounce when the market gives you that break. you don't have to take action, you shouldn't take action. i want you to make your decisions with as many facts available after the quarter, when everything to be known is known. the answer is always

disappointing for people who want to make the big trade and come up to me constantly, jim, jim, is it right? i want the bigger bucks and it cannot be me betting on the direction of the quarter. believe me, if it's that good, it won't be the last big quarter. i know, some of you will be mad at me, jim, you cost me lot of money. [ baby crying ]. and you say, why did i miss that move? i say, so what? much bet her to take your time and do the full homework on the quarter and watch and listen and only then pounce when the market gives you a break say the market's great and you thoroughly reviewed the numbers and conference call you checked it out, you can now buy the mid-priced stock with conviction because you did your homework. those are the best opportunities earning season gives you not opportunitiens to lose money gambling ahead of the quarterly report. that's how the true

professionals do it. if you play it this way, you'll be one step closer to joining the club. people always get disappointed when they hear me say, want to bet on the great quarter, make instant cash. they get antidotal belief evidence that proves gaming the quarter works even though that evidence, frankly, from my point of view, i've done literally millions of trade, is totally worthless. the truth is if you forego making a quick buck by gaming earnings and miss a company's great quarter, please, please, don't beat yourself up, don't whip yourself. if a company is that good, it will probably blow away the numbers again, waiting to buy those stocks after earnings season is how you play it. gaming the quarter will give you a quick buck. on this show, we're after the bigger bucks. we are long term greedy. the biggest bucks in fact, those cannot be made are not the ones made in the heat of that

quarterly report. wow, i have to take stock, mcdonald's quarter looks good. we're not doing that amateurs try to gamble on quarterly reports. i'm urging you not to do that. take your time, trade like a pro, do the homework. do not buy stocks during earnings season! undefeated professional boxer floyd "money" mayweather has the fastest hands boxing has ever seen. so i've come to this ring to see who's faster... on the internet. i'll be using the 3g at&t laptopconnect card. he won't. so i can browse the web faster,

email business plans faster. all on the go. i'm bill kurtis and i'm faster than floyd mayweather. (announcer) switch to the nation's fastest 3g network and get the at&t laptopconnect card for free.

if you've always wanted to trade like a professional and never known how, now you're part of the way there. you know the mistakes to watch

out for and pitfalls the pros avoid. just because you have a day job doesn't mean you have to invest like an amateur. follow these rules and get working. i always like to say there's a bull market somewhere and promise to find it just for you right here on "mad money." i'm jim cramer. see you next time. patience doesn't turn around overnight and neither does companies. a bunch of stocks can do a bunch of nothing remaining stuck in the mud for ages. that doesn't mean sell, you have to wait. take a deep breath and be patient. i know you get ancy and think if the company was any good, it could be going up. if your stock is going fast but

you still believe in the long term thesis, remind yourself what made you buy it in the first place. if the long story hasn't changed, take the long term view. don't let a rocky market cheat you out of what could be spectacular gains. there's always a bull market somewhere and i promise to find it for you on "mad money." week nights at 6:00 p.m. and 11:00 p.m. cnbc. is the bull market alive and well? why you should be buying banks right now. milton friedman, he would have been 97 today. his birthday, coming up.