i'm jim cramer. and welcome to my world. >> you need to get in the game! >> going out of business and he's nuts! he nuts! they know nothing. hey, i'm cramer. welcome to "mad money" and i'm trying to teach you how to make a little money. my job is not to entertain but coach and talk to you about the stock market. call me. up day, down day, flat day. there's something you need to understand. investing in a lot like comedy. in both places timing is everything. perhaps that similarity is why so many people call me a clown, and a joker if not a midnight toker. [ rim shot ]

maybe complementing my keen sense of time. either way, when it comes to stocks, getting the timing correct, knowing the right moment to buy and the right moment to sell is, let's say, among the most important yet difficult and frustrating parts about managing your own money. why you hear so many say it's impossible to time the market. a whole cottage industry of naysayers making a living telling you there's simply no way a regular investor can do it. might as well give up on trying to trade, on picking your own stocks. put your money in an index fund that mimics the performance of the market as a whole and leave it there for all eternity. nothing get index funds per se. sometimes decent ways to make money in market. don't have the timing or inclination of individual stocks. the art they're the only way to go is totally bogus. plus, even with an index fund timing is crucial. if you bought at the peak, october 2007, when the s&p 500 was trading in the 1500s. if you came in, bought the bond in march 2009, s&p traded below 700, made out like a bandit. how important is timing?

the s&p, the top in 2007, ended up losing more than half your money in about 18 months. sure, you made a decent chunk back. that brutal loss can take ages to recover from. even if you bought the s&p at the bottom, doubled your money in less than two years. if you bought the dow jones industrial average and then panicked you sold 20% of your capital. admittedly, extreme examples but get the point. right? timing is everything. unfortunately, actually timing your buys and sells effectively is the single most difficult part of damaging money. it's my mission to life to make awe better investor tonight i'll teach you how to do a better job timing your moves, sharing common mistakes i've made and what i've picked up in over three decades of trading.

learn from my mistakes and i've made them. the reason timing is so tough, the moments of greatest opportunity, when you should be buying stocks, hand over fist -- buy, buy, buy -- are often also the greatest moments of terror and angst, when everyone is telling you to get out, and all instincts are screaming you should panic. more important, the most frightening, days you were freaking out because the market is being schmized, almost never the right time to sell. right thing to do, right move, to buy virtually every single time in my 30-plus years of investing. that's why i come out every night and say nobody ever made it panicking. an awful strategy, if you call is a strategy. often because you don't like a market doesn't means it's the right move to sell it. once in my 30-plus year career was it ever right to trade into

a sell program of epic proportions were others were panicking left and right. every other time selling was warm, buying -- almost brilliant. whether the sell-off during the japanese crisis, flash crash, '87 crash or 9/11 for that matter, panic selling is not the smart thing do. stupid. maximum fear, prudent buying worked big. only time panic made sense, sell into 2008. the financial system was on the brink of collapse. that was a systemic crisis not a temporary crisis. so panic even in the midst of a nightmare sell made plenty of sense which is why i told you to sell when i went on the "today" should september of 2008 what your advice today? >> okay. whatever money you may need for the next five years, please, take it out of the stock market right now.

>> ooh, doctor. buying actually hurt you, because storks kept falling and falling. you never got a chance to own the merchandise you bought at the dip of a higher price. that is the only time. just once in over 30 years. look, i know this rule and its exception. october 2008 highly criticized and people didn't sell off. chided for yelling fire in a crowded theater. my response was succinct. if the theater's truly burning, you need to try to get people out. even as you know others might not be able to make it. in 2008 and in 2008 only panic was the right move. the theater was on fire. the market headed down huge. almost in a straight line. it was smart to sell even when we were already several hundred points down. basically the market kept falling. getting back in was tough. you managed to step aboard as 35% if you took action when i told you to get out now. better to keep that sell call, done in a less dire moment. every time, crash or sell-off,

afford to wait or some have bought into the panic. okay? should have bought in the panic. on the day of a vicious sell just a, hold your horses. if you want to sell, likely you'll get a better chance to do so at better prices. likely. you have to be patient. even as i recognize patience doesn't come easy when the markets get eviscerated, panic selling is not a strategy or opinion. empirical. seen it work once when the entire financial system was teetering on the brink. i'm not betting it's happening again. no matter how many thing, going wrong, how much it looks like it's end of the world, dump your stocks is the wrong move. even in an awful market, inter day rally, genuine up days, believe me, i've seen what happens when you proclaim sell, sell, sell. when you proclaim it's time to panic. and then you get it wrong. when long-term capital is collapsing in october of 1998 i

wrote a column for the online publication titled, well, get out now. advising people to sell into an intraday downturn. the fed didn't understand the gravity of the moment. within one hour the fed held an emergency meeting to cut rates and the market rallied back in my face. it was a terrible moment in my old hedge fund magnified by, the moment i wrote about confessions of a street addict, cautionary exercises, embarrassing for me to talk but, but do better than me. dead wrong then. i've reversed my stance not long after that. same day, in fact, but too late. high to pay up gigantically for the same stocks i sold in the morning. hardly embarrassing. not that lucrative. no matter how much you want to, bad timing. keep your head. because you will get a better moment to sell. in all of my years of trading, panic has been the right

response to a huge sell-off once. every other time the right move, buy into weakness. keep that in mind the next time we get a horrible pullback. let's go to paul in new hampshire, please. paul? >> caller: hi, jim. >> what's up? >> caller: boo-yah from new hampshire. >> back at you. nice. >> caller: i just finished reading your book "getting back to eden" and wanted to thank you for accurately casting the sentiment of the home investor in 2008. >> thank you. >> caller: i found the concept of the whisper number very frustrating. so what i'd like to know is, why does it exist, who is doing the whispering and why don't the analysts come out and say what earnings are expected to be? >> look, first, it's a great question. because it's common sense. right? if they really know that x, y, z corp. will earn ten cents, why use nine? because they don't want the company to report in-line number, because it will go down. they say nine cents and then they hope for ten cents, but that's the whisper number.

sometimes if you get the whisper number and ten cents you think nothing's special and sell anyway. i'm in total agreement, paul. they want to create an upside surprise. nord in washington. >> caller: a question about figuring out which eps growth figure i use and what about one at the negative figure such as verify rising or cisco? >> price earnings versus growth, i like to use the normalized earnings power. if you have a loss try to see what it's done in the past and project it or i like to use the analysts numbers. go to yahoo!. all the estimates. use them to figure the peg rate. in other words, use the future numbers. better that we always invest in the future not the past.

to bob in minnesota. bob? >> caller: boo-yah. say, my question is on a yield, you've got to be in on the x date to get a yield. if you miss that date, how long do you wait until you know that next yield comes up? >> right. >> caller: how does that work? >> is some monthly dividends. most of quarterly. don't fret. take a long-term view. plenty dividends. reinvest the dividends. don't understand reinvesting dividends go to the annual report and website, gives you the most succinct depiction the power of compounding if you reinvest dividends. wait to time. time after time i tell you not to panic. you won't get a profit that way. look, no one ever made a dime panicking. don't you be the one that does that. "mad money" will be right back. >> announcer: missing out on some "mad money," get your text

today. text mm to 26221 to get cramer right on your phone. for more info, visit madmoney.cnbc.com or give us a call at 1-800-743-cnbc.

you can have the best stock picks in the world and it won't mean a thing for your portfolio if you don't also have a good sense of timing. i'm a big believe in the notion ordinary people, non-professionals, can manage their money as well as the pros or better, and that's why i come out every night to coach and teach you. you may have heard from the naysayers, it's entirely possible for someone with no wall street background to outperform the bench marks like the s&p 500 as long us a know what you're doing and think like a disciplined investor rather than a gambler. a huge part of knowing what you're doing is having decent timing, or at least knowing enough not to make bone-headed mistakes about timing, about when to buy and sell.

i'm going over some of the most frequent errors investors made. the ones i've made to steer you on to the right track. it's easy not to make mistakes when everything's going your way. when the market turns south, everything is falling apart looks like and pressure is on, that's when people screw up. say caught with your pants down, proverbial. caught owning too much stock, you have what's called too much exposure. been there. what a nightmare. so horrible. the worst part is not knowing what to do. whether you should blow out of your stocks or hold tight. i just explained why selling into the teeth of brutal clients is ruining. the propensity to take sweeping, drastic action. when it seems like everything's going wrong, you just know the economy and market are getting worse, when you're dead certain nothing good can happen, take a breath.

hold it. and don't do anything crazy. what's crazy? i'll tell you what's crazy. what's crazy is selling everything. sell, sell, sell, sell, sell, sell, sell, sell, sell, sell. even if you own too much stock and want to open un, resist the urge to sell everything. that's bad timing. [ buzzer ] i always tell you never buy or sell all at once. pure arrogance to assume you can time trading that wale. my rules buy and sell by increments. a stock goes down, buy more at a lower price. higher after you sold some, you know what? sell more to take advantage of the higher price rather than feeling like a chump. that rule applied to more than just individual stocks. it can apply to your whole portfolio. no matter how bad it looks never sell everything at once. what's the right move, then? here's your crisis playbook for doing awful moments in the market, deteriorating before your eyes and you feel like it's the last train out of the bad station. first, you can't sell everything.

but you have to sell something. not everything you own is equally good. some might be darn bad. my rubric what sold during nasty pullback. big profits in stocks? don't give them back. that's a cardinal sin as i say in all my books. ring the register. you'll have something with a fundamentals have changed, where the story's going against you -- blow it out. something that you think is going lower, even just short term, sell, sell, sell. >> some of it. just do it. that's fine. get your head clear. you can buy it back lower when the risk is more in your favor. do not sell it all. that's plain stupid. don't ever blow out of everything -- don't give up on stocks entirely that you like and hide in treasury bonds or certificates of deposit or yields. instead when things look low, get ready to redeploy capital into stocks selling off even though they don't deserve to. use that money to buy something you really like. why not in the heat of battle in

the calm of the end of the week i rate my stocks in my trust, rate them one to four. the one's being the best, want them and fourth being, well, the worst time to get rid of. one, top stocks and names you begin to buy, buy more of. right in the moments of pure chaos. you decided you like them. don't wait for them to get back to even if you can own something else that's likely to go up a lot more over the same period of time. some company's going better, you should switch. why don't you sell at all when it seems the market's turning against you? why not? american stores. don't know it? don't remember it? american source is the favorite supermarket. the one my mom was friendly with all the checkers. i had owned american stores through the 1990s, my old hedge fund. planned to take it home. so much more than selling for

and the time would be on my side. then one day we got a really brutal sell-off and i just couldn't stand the pain. i was so at this address it was driving me crazy. >> the house of pain! >> i got goldman sachs to buy my book. simply have took all my positions down 2% from where they were. you could do that. offer every stock. remember, running 400 million at the time. what it was -- >> that was easy. >> yeah. included in the package i sold to goldman, america's source. i didn't want to own anything. two weeks later after i sold all my positions albertson's bought american stores. big premium, huge, would have made my year. i couldn't believe it. i had held on to american stores all these years and like a chump sold it because i couldn't take pain. if i'd added to the position rather than blown it out, smart, the company was doing fine. i could have made my year. i always remember that moment

because it caused me to rethink how i thought about blowing out my whole portfolio and convinced stocks should go lower. goldman sachs took me out of the stock market down 2%. why? stock market bottomed down 2%. didn't have the guts to go back in at the time and going down, 4%, 5%, 6%, 7%, 8%. what's the moral? the pain sometimes becomes too unbearable when you're all-in. many have little to no cash on the sidelines. sell everything was a massive mistake. use a top notch sell-off to pick at. not load up on but pick at your ones. like i do for action alerts. trust. favorite stocks active to sell off ends. they always end at some point. not all stocks bottom at the same time. if you rank them you probably won't even care when they bottom

because the best ones get put on sale along with all the other merchandise, the good with the bad. with me, with the chaff, but selling everything, getting out at one time doesn't leave room for the possibility for things to get better or leave room for the next american stores. takes you out in addition to the bad ones. awful times. bottom line, not every big decline in the end of the world. never trade like it's the apocalypse. go to the super of stocks, find what you want to buy on weakness and always remember, i checked out the most important stock i liked in my zeal to get into that ten items or less line, and because of my haste, i miss add huge american source buyout along with a magnificent stock market value that followed soon after i left the store. please, please, do not repeat my mistake. after the break i'll try to save you more money. >> announcer: build your future -- >> happy boo-yah to you -- thank you for not just the money what it translates into, in my case a college education for my son. >> thanks for your passion for stocks. "mad money" works for the small investor.

>> "mad money" you're making me money for college. boo-yah, i love you. >> how many other shows have kids calling in saying boo-yah? >> announcer: one at a time. jim cramer, only on cnbc.

you cannot time your moves correctly unless you know what to own. that's what i'm always telling you to do homework one hour are per week if you can. only by being familiar with the companies in your portfolio can you know when it makes sense to buy them or sell their stocks. i accept you might not be able to keep up like that. you could still be good to go if you follow this show and check in with your stocks on a regular basis. knowing what you own is more important than ever. we live in a world where the media never met a disaster it didn't like. a negative story a bear case, you could absolutely bet -- >> aaargh! >> that press will go into total hurricane mode day after day after day. the more sensationalistic and frightening, the better.

this is simply a fact of investing life, ladies and gentlemen. the media takes a political issue, every weather issue, story of crime and punishment and fans the flames of panic. trading them is all a huge catastrophe, and the general warning, it's like apocalypse now. take it as a given. every negative story will be exaggerated to make it seem like the end of the world as we know it, or on the eve of destruction. the older demographic. we simply have to accept this overreaction is part of the sea change. sea change is the way the business medium works. a sea change that can shake you out of anything you own or might want to buy. at times unable to steer effectively against the media's gloom machine. me, included. not in the gloom machine i hope. instead, view all thoughts with unlimited pessimism over all outcomes. how many times have we seen this happen?

think about it. the market has sold off, sell, sell, sell, sell, based on instability, civil war in libya. tragic earthquake in japan and the latest sovereign debt crisis in europe. what should you do during these scares? what's the right way to react to this kind of crisis? we're far away from a solution in europe. these cries moments do make terrific buying opportunities, if it's in the right stocks. not all stocks. some are not prime opportunities. how? okay. let's figure this out the "mad money" way. whenever events occur that immediately drove down all stock because of the stock futures, because they overwhelm the whole market, we know that, don't we? first, we have to put the event in perspective. have to ask ourselves, okay. the news is potentially tragic, dangerous, terrifying. but what affect does it have on the earnings per share? the numbers? let me give an example. in the 20 years i've invested other peoples money a slew of events hit the stock market. i use what i call the bristol-myers theory.

the most consistent earnings. here's how it would play out. at the hedge fund, morning meeting at 6:00. i always thought they came at 6:01. what's point? might as well go home. money passed. i dismissed you. sent you home if you were a minute late. they were lucky. look, i didn't throw water bottles at you or electrical appliances. all right. did it once. anyway, i saved that for when people lost you money every time we get one of these nasty events, morning meeting someone would say, oh, oh what are we going to do? the nuclear power plant in chernobyl melted downed. iraq just invaded kuwait. what do we do, jim? i would scream back dripping with sarcasm, what the heck does that have to do with the earnings of bristol-myers? of course, nothing. the first thing i did when i saw

or herd heard about events, make a list of bristol-myers. they're still on that list. the companies not hurt by the events even if it was worst than expected. given the 24-hour news cycle blows everything out in pro portion and we get terrifying crises new week, develop your own list of bristol-myers names. make a high yield pipeline. maybe verizon, another steady eddy. big southern company. just be ready to buy them when we get a market wide sell-off base and exaggerated prices that won't hurt the earning of verizon or other partners, my travelers trust. step two. ask yourself, is this event really bad for all earnings out? for example, the egyptian demonstrating in the streets early 2011 trying to kick out their dick cater, even oil stocks got knocked down with everything else. curious? what a tremendous buying opportunity. if you bought the oils down. oh, man. you made -- a killing.

so remember when there's a big scary crisis somewhere in the globe that threatens to knock down the market like the credit crisis in europe, remember the bristol-myers theory. put it in perspective and maybe you might feel like -- >> buy, buy, buy. >> buy. the bottom line. there will never be a shortage of terrifying events around the world that will bring down the whole market. especially after amplified by the media's activity. randall in california. randall? >> caller: hi, jim. frequently i've heard you make reference to buying deep in an option. >> right. >> caller: and i'm trying to get some kind of definition put around what is meant when you say go deep in the money? >> i have a 100-page description of it. out a couple months means what's

called a stock replacement theory. $600 stock, a lot of money, buy a $550, obviously less money. cut off from the down side. say it's $40. sorry. say it's got a $4 premium, buy it out a couple months, it could work. the one i describe in the book. get the book. it's about stock replacement. not having a big risk to the common stock. ted in florida. ted? >> caller: how you doing, jim? that's for taking my call. >> my pleasure. what's up? >> caller: a quick question, actually two or three small parts. a portfolio $100,000 wanted to invest in precious metals what percentage of $100,000 would you recommend as a portion to invest and would you go either gold or silver and if you go silver would you go with smaller commodities or rather than larger bullion? >> no one believes me, junk metal. it's junk. gold, up to 20%. do not buy it at once, on the way down. if it doesn't come down, 30% of

that position, we missed it. you want 20% gold. gld, just fine as a proxy. shaking you out of proverbial investing. promise. there will be more. take a deep breath, make a list and do some buying. stay with cramer. >> announcer: they say money never sleeps. neither does jim cramer. follow @jimcramer on twitter.

welcome back to my timing is everything show "mad money." teaching you the timing of your business and sells can and should be done. those who say it's impossible they want to keep you in your collective chains. consider me a bolt cutter.

setting you free. i want to talk to you now about a particular kind of chain you need to be unshackled from. it's called the ipo chain. first, i like ipos. we do our best to try to analyze them for you all the time on "mad money," but they're not easy to do. so often you'll call me and say, jim, will x, y, z ipo be a good one? i say, how should i know? depends where they bring the deal. authentic wall street gibberish, the price offered. say 50 million shares when the deal's done. banker brings the deal at 20. yeah, 20 times, values the company at $20 billion. the bankers can do a lot of different things, variables that you realize. first, don't offer all the stock there is. insiders on boatloads might own a lot, whoever sees the company, a substantial amount of shares over.

secondly, the $20 price may be what's called the price talk. meaning what the initial price they're thinking of, not the last price where the deal actually comes at. the demand accelerates you'll hear the price move up over time. maybe from $25 to $30. obviously, a much more rich level. think about it. i may like the ipo at 20 and not 30. that's not much difference than i like the stock at 20 that's already trading and a sale at 30, because it's gotten too expensive. if they want to generate what's known as a hot deal, one that immediately goes to a premium after it opens, a period where from its priced after it opens, they can hold back stock. this is crucial, ladies and gentlemen. so let's say again, x, y, z, 50 million shares outstanding. the bankers, canvassing the potential buyers through the road shows, talking to clients, what's known as indicators of interest might sense while the company that 50 million shares, there's only demand on this ipo to be sold if priced as $20 per share. 50 million shares, the stock might wallop.

the opposite is true, too. cut back the number of shares offered. these bankers are experienced. they can figure how to make a pop and how much of a pop they want by severely cutting back the number of shares they offer. of course, all done, give and take, with the issuer, say the bankers say, hmm, we got demand for 10 million shares at $20. that's where it's oversubscribed. what the demand means. the parlance. might not be hot enough for a real hot day. cut it back to 5 million shares. that cutback they believe would generate excitement when people get their allocation or the number of shares given versus what they ask for. that makes for a hot deal. bankers have demand for 10 million shares issue only 5 million shares everyone who wants in will be cut back who wants the stock. the deal were be wildly oversubscribed and el occasions well below what you were hoping for. that's how hot deals are made.

you got to scramble and buy the rest of it in the after-market. that's what drives it up. i call these offering sliver offers, creating a pop, because bankers chose to make the deal hot, but customers put in the deal. customers perhaps to create excitement for the company's stock. if they offered more stock on the deal, a risk the deal wouldn't hold and nothing's worse than a broken deal. one that immediately goes below the offing price. it hurts shareholders who bought and hurts the company. better offer a sliver, get people excited and six months down the road, what's known as the lockup expires, hopefully the stock will be well above where the ipo is priced and then choose to sell will still get a very big profit. i don't care about the insiders, though. i care about you. i want you in on the sliver deals. a deal when a company offers less than 10% on ipo i want you in on, even if i don't like the

company. take groupon. i'm not a fan of this company in general. this one in particular, i'm not sure they have staying power. they can and have done great things for retailers, but i've tired of my daily groupon e-mail in the morning. i don't want to go ten miles out to save money on tooth whitening, get a slice of pizza or a brazilian waxing -- whatever that is. groupon, the ipo, let me in! the bankers only offered 40 million share. that's sliver offering almost assured demand would exceed supply. sure enough, opened at 28 and traded to 30. raised $700 million, received gigantic valuation and buyers made out like bandits, right, if you got in at 20. how about the buyers known at the aftermarket? the price of the stock when it starts trading. ah, if you bought it at 28 where it opened you didn't have room. could have made $2. after that groupon, an ugly slog down.

almost half of its high before it bounced back above the offering price. what was the right thing to do? take the money and run. get stock on the offering and ring the register when it opens. the brokers don't like to encourage flipping. this is called flipping. putting in for a hot deal i am not your broker. they may not condone the practice i say, why not? i'm working for you. you do commission business. you do fee business. you put in for a sliver deal which is designed to pop, why can't you take advantage of the pop? the bottom line, sometimes only two decisions to be made here. putting in for a sliver deal and sell it into the pot. you time that sell to the very open of the hot deal and you don't stick around for one red hot minute longer and never, nerve never buy in the aftermarket. the vast majority of time buying in the aftermarket is for suckers. be smart. take the money and run.

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not every stock can be owned forever. and there are very few stocks that you should own all the time. year after year, decade after decade. the fact is, if you don't know what would make you sell a stock, then it's not okay for you to buy that stock. lots of people end up selling at the wrong time because they never anticipated selling at all. thought why they wanted to buy. they didn't have an exit strategy. [ buzzer ] as you're investing coach i need you to make sure you don't make that same mistake. how do you time yourselves? okay. there are many stocks where when you buy them you need to understand that some day possibly some day soon you will have to. >> sell, sell, sell. >> for example, high-flying tech stocks.

simply not safe to own unless you recognize they can't be owned forever. that leads to ringing the register, take your profits when you have them before they slip away. same for smokestack industrial companies that only make money when the economy's healthy. same with cyclical stocks, hostage to the business and gdp growth. sell them eight days to sunday at the first sign of a slowdown. a lot of this comes down to understanding what you own and being willing to change your mind. a tech stock like scoreworks solutions is not the same as pepsico and nvidia is not hershey and arm holdings -- vicron is not mcdonald's. tech names, they are called trading vehicles. they can fly and then crash. >> ah! >> the second half, pepsi coase and others, staples. plod along step by step, inch by inch, slowly but surely. can make you a lot of money in not a lot of time. you got to take it off the table every now and then. if you let it right, that vehicle will eventually crash actually dropping 10, 20, 30% in a matter of days or even hours. >> all aboard!

>> a staple on the other hand can be owned long term. that doesn't mean nothing goes wrong. management can still mess up. price of tobacco go too high, have to cut it. but unlike think will fall off a cliff. when it comes to trading vehicles like these tech stocks you got to be willing to change your mind and sell when time to sell. tech stocks that are winners, like smartphones or pcs or tablet computers are losers when the cycle is weak. >> moo! >> a stock like skywork solutions which makes components found in all kinds of mobile device, smartphones, make you a lot of money when time, are good.

but can get annihilated when business isn't hot. no cycle. think about it. no cheerio cycle. no hershey bar cycle. we don't talk about people using more heinz ketchup in the fall than spring. march 2000, fantastic. you had to catch it. if you bought it any time up to the last two moss and sold it when you had to, you made money. perhaps a lot of money. back then, you bought all the parts of the equipmentmakers, independent expanders buying equipment like mad. the demand fell apart and buying cancelled. didn't sell by march 2000 you were blown out, but if you did buy between 1998 and january, say, of 2000, you made more money than you ever made again in the stock market. actually at least in the last ten years. i tried to teach you to change your view. i don't want you to end up like the victims of the dotcom bomb. refused to sell and got wiped out. sometimes it means selling something even though you bought it at a higher price. facts have changed and

businesses gotten weaker. often the tech stocks get hammered at the first signs of deterioration. don't tell yourself it's too late to sell. it's not. they can go much, much lower than you ever believed. intraday strength, lighten up. your first loss is your best loss. i tell you in jim cramer's "real money." this is where discipline makes a difference. i'm tireless in telling you not to be greedy, saying you have to take something off the table and play with the money. i endlessly tell you doesn't matter when it's been, only where it's going to. you don't want to own a high-flying stock going down, down, down. when that happens, sell it. buy it back later when business is improving, not deteriorating. bottom line, don't treat risky trading vehicles like shooting star tech stocks as though they're staples that can be owned for ages. handle them with care. handle them with caution. and you can do very well for yourself. remember to take profit on the way up and get out on the way down. you don't have to call the top

to make money in these names. you just have to be willing to jump ship when it's clear the stock has peaked and ready to head down. for the count. let's take a call from dale in iowa. dale? >> caller: hawkeye boo-yah to you, jim. >> oh, man. your way with the hawkeyes. ooh. >> caller: i'm a retired investor learned the hard way, things you're tying to tell your listeners. listen to cramer, reads the books. i've done all that. two questions. >> thank you. >> caller: using preferred stocks at income. how much of my portfolio do you think should be in preferred stock at my age, and how do you evaluate preferred stock as to their ratings? >> okay. this is a great question, because you know i've been trying to figure out, you know, the worth of different bank prefers where you get really good profits, and i am nervous, because i don't like to have my

income being from situations where i'm reaching for income and that's a lot of prefers in the banking business. away from the banking business, a lot of prefers are really good. it's an issuer issue. not more than 20% of your money in one issuer and i wouldn't put more man 20% in prefers. frankly, not enough good prefers to get that much in. be careful of the prefers. particularly the bank prefers. selling for a profit does not make -- sell out. it makes you a smart investor, heaven's sake. timing is everything. choosing the right time to buy and sell is the only way to make profits fervor. just a second. profits forever? leave that to the diamonds. "mad money" is back after the break. let's go to kentucky! >> caller: the hillbillies! >> a hillbilly boo-yah! holy cow.

>> caller: the las vegas boo-yah! >> caller: a big fat new york, hey, fuhgedaboudit. boo-yah! >> michigan. >> caller: california. >> caller: georgia. >> announcer: boo-yahs come from across america. let cramer help you channel yours. "mad money" with jim cramer, weeknights.

catch up with "mad mail." thanks for your brilliant insight and guidance. no period after the years you've been doing "mad money." thank you. a lot of peers.

how does this affect the view of a stock? evaluate a stock with high interest? at some point shorts cover. karen, i made it my business to not -- not -- make that decision. i like to look to see if there is a lot of short selling. i do that because i respect them. they've been wrong as much as right pap perception they're smart money. what smart is, a big argument against the stock, or at stock, i've got to tell you, seen a lot of shortage positions in my lifetime that turned out to be great places to buy. not just bust the shorts but because the shorts have been wrong. that happens quite frequently. let's discount it as a tool in our arsenal. one from brandon. hi, mr. cramer. as a 24-year-old young professional who is fortunate to get a full-time job in my major three months after graduating

college -- congratulations -- and brought home on my own within 10 months of graduating a feel a good time to get in the stock market. a big notion having a diverse portfolio. as a beginner, how many stocks do you recommend? put away money for an index fund. first $1,000, index fund. after that start picking stocks. i don't want you to have -- honestly. if you had $2,500, start buying $500 in five different positions. about the amount i'll give to you do it. first the index fund. diversification, with "mad money" doing investing. stick with cramer. >> announcer: as the president urges big business to embrace ingenuity. >> my message is now is the time to invest in america. >> announcer: cramer's on the ground finding those ready to run. >> this is about made here. this is about made in america and made great. >> announcer: "mad money" with jim cramer.

weeknights 6:00 and 11:00 eastern only on cnbc.

timing is everything, okay? that's what we're teaching tonight. try to find it right here for you. i'm jim cramer and i'll see you tomorrow.