friday. i'm jim cramer. welcome to my world. >> you need to get in the game. >> firms are going to 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 "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you some money. my job isn't just to entertain but i'm trying to teach and coach you. call me at 1-800-743-cnbc. in recent years, stocks have become more hated than any time i can remember in my career. spans a lot of time. but i still believe anyone can turn a profit in the stock market as long as you are willing to put in the time and effort to keep track of what you own. i wouldn't come out here any

time to educate you if i didn't think it was not just theoretically possible, but actually feasible for the vast majority of people to succeed at managing their own money. if that's the case, then why is investing so difficult? how come so many people struggle to make money in the stock market? how can i believe out's possible for you to beat the averages. the big benchmarks like the s&p 500, the dow jones average when so many people fail to do so. simple. you can do it. but you have to do it the right way. one of the biggest obstacles to successful investing is a lack of clarity about what investing means. i have seen countless people try to follow conventional wisdom about money management only to have investments wiped out because the conventional wisdom is wrong. the worst part is those people had no idea they were making a

mistake. they thought they were being responsible. to borrow a phrase from cool hand luke -- >> what we've got here is -- failure to communicate. >> that's why tonight i want to demyself identify the concept of long term investing. an idea that's become more of a hindrance than a help. listen up. tonight, setting you straight. here on "mad money" we are about long-term investing often mischaracterized. there is a serious problem with the notion. it goes like this. often people let the concept of long-term investing get in the way of investing. if you think long-term investing is about making boat loads of money over years, decades, lifetimes, i'm on board and i can teach you to do that using the knowledge i gained in my old hedge fund but there is a darker side. all too often i have seen people

go long-term investing as an excuse, an alibi either for poor performance or for not paying attention to what they own. you often hear you shouldn't worry about your losses or that it's okay to make back short term pain. sometimes absolutely true. most of the time, losing money month after month after month or year after year isn't a good recipe for making money over the longer term horizon. short-term losses don't transform into long-term gains if you wait long enough. making money over the long haul is the only goal in the game. it's become the ultimate exe cuse, the alibi for short-term losses. believe me. that can only make you a worse investor. before i teach you to invest for the long term i have to disabuse you of the long-term alibis you have been fed for ages and still are today. where do the sirens of long-term investing lead you astray?

at what point do you need to cover your ears and tie yourself to the mast? so you won't listen to conventional wisdom and steer your portfolio to the rocks. first and most important, long-term investing is not the same as owning stocks for a long time. in other words don't confuse being a good investor with the ideology of buy and hold or buy and forget as i dub it. buy and a hold has been the conventional wisdom for decades. this idea has lost people more money than the lost two financial crises combined. just because you have a long term horizon that doesn't mean you can take loss after loss in the short term. just because losses are unrealized that doesn't make them into gainer or so potential gainers. losses are losses. realized or otherwise. the notion of being in something for the long term doesn't justify owning damaged goods. stocks of companies in bad shape, damaged goods.

the idea behind buy and hold is once you purchase stocks you wait. me? i have never liked waiting. it also is a terrible strategy. i'm constantly saying you have to keep track of investments. you have to do the ridiculous hard, time consuming homework. it's what i tell you about all the time. you have to read the s.e.c. filings, listen to conference calls, read transcripts. much of the research that was available only in those paying millions in commissions can be found on the web. yahoo! finance has everything, cnbc, the street, they've all got it. it's your money. invest the time in it. advocates of buy and hol act like you have a license not to pay attention to the short run. like buying a stock allows me not to do homework. you have to pay attention or you lose money. that's why people under perform. you can't recover from losses until you get engage with your

portfolio again. you're not stupid. you can get engaged and do this. sometimes companies go into secular decline and the stocks never recover. in that case you can't wait for a turnaround. get out before the damage becomes horrific. yes, polaroid, kodak. research in motion, nokia. how about radio shack? that was a good one. super value. all the way down we were told long-term, you're fine. or in other words being a long-term investor doesn't give you license to be a lazy investor as anyone who owned stocks through the horror of the crash of 2008 and 2009 knows, it doesn't work. investing for the long term doesn't mean owning stocks forever. it disabused people of the idea you can buy and hold stocks for eternity and somehow bank of america comes back. if you don't pay too much attention or try too hard, uh-uh

g -- i get it. the lessons are being targeten. that can't happen on my "mad money" watch. i have always been one of the loudest opponents of buy and hold. in the world of euro melt downs and flash crashes many people who espouse the philosophy have uh tried to change their own tune. doesn't mean you should write off the idea of long-term investing. doesn't mean stocks can't make you money over time. that's what many of you think if you confused long-term investing with buy and hold. buy and hold was a bonus but stocks are still the best way to make money for retirement. 529 to send your kids to college or build up a savings for a house, car, vacation or stocks with dividends that allow you to compound wealth by reinvesting. that's good investing. never use it as an excuse for bad performance and holding stocks that can't pay debts or

dividends. something you won't even know about if you buy and forget. it's a license not to have to find out about it. bottom line. long-term investing is mixed up with bad ideas but that doesn't mean out's not worth trying. i can teach you disciplines and strategies to build long term wealth by investing in stocks as long as you say, hey, man, i i'm a long term investor is no excuse for not following the rule or so doing the homework. being in stocks for the long term requires more diligence or patience than the short term. don't throw away all the lessons i teach you. you're going to need them. to paraphrase the amateur investor and beauty gertrude stein a loss is a loss is a loss. bill in florida. bill. >> caller: hey, yes, jim. nice to talk to you. >> same. >> caller: i'm a retiree on fixed income. i'm very concerned about the future. >> mm-hmm.

>> caller: there is so much uncertainty in taxes, in the elections, inflation is a big concern of mine. is there anything i can do at my age to protect myself from the uncertainties coming up? >> okay, well, look. you ev you are a person who needs to heed the 20% in gld, gold bullion. that's your best defense. i'm not going to tell you to buy bonds that yield 2% to protect you. gold is going to be the best defense you have against the worries that you just outlined. anthony in virginia, please. >> caller: washington redskins boo-yah, rg-3 nation stand up. >> yeah. dan snyder is your owner. have you thought about that? >> caller: i've got a quick question. [ booing ] >> caller: when the market is over bought should i stay on the sidelines or look to get in long term? >> when it's overbought, i use the s&p oscillator that comes to

my door on saturdays. we're plus five meaning we are overbought take a pass. another time will come. however, you can get started small and hope it comes back if you just can't resist. sam in ohio. >> caller: big glass city boo-yah to you. >> loving it. what's up? >> caller: i have a question. i have been looking at utility stocks and looking at either going with preferred instead of the common shares. just wanted to get your opinion on maybe what might be better. >> come on, man. we want upside. we don't want to cap the upside. a lot of utilities are growth stocks in a growth economy. you know what? let's own them outright. we'll do fine. of course i want you in the market for the long run. the idea of trading back. you can't beat the high frequency traders, give me a break. i want long-term investors but that doesn't mean buy and forget. even when you intend to hold onto a stock, do not throw out the rules. keep doing the homework.

be sure you are in the right merchandise and stay with cramer. >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. >> here's a big las vegas boo-yah! >> a big staten island new york hey now forget about it boo-yah! >> nashville. >> michigan. >> california. >> georgia. >> alaska. >> announcer: boo-yahs come from all across america. let cramer help you channel yours. weeknights. [ male announcer ] drive a car filled with

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let's talk the price is right. not the game show with bob barker. i'm talking about stocks here. want to make money from your

stocks then it's critical to buy at the right price. that's true whether you are making short-term trade or purchasing something that if everything goes right you expect to hold it for years. the price matters. when you pay too much for a stock you make it difficult to rack up the big gains we can't get enough of on "mad money." you can have a fantastic a idea but if you get the price wrong you may not make money. i think price is underrated as determinant of successful investing which is why tonight i am giving the power of price its due. how do you find the best price to pull the trigger given how important uh-i think it is. you have an advantage over those using a short term ho e rye zon. i'm talking about time. as the longer term investor you have all the time many the world. when you want to buy stock because you like the underlying company's prospects and when there are no near-term catalysts that can drive the price up soon

that's a recipe for being patient. you don't have to pay the price the markets give you at that moment. you can be patient and wait for stock to come down to your price before you do this. [ gunshot ] you are never going to geet get the all clear signal like this [ bell ringing ] and say, oh, i know. how do you know how long to wait before you pull the trigger? simple, don't know. this is an area where you have to embrace the facts of ignorance. that's why i tell you to buy stocks in increments. loading up gently because we are all ignorant in the end. let's bet that we are going to get the wrong one in first. if you buy one level and the stock goes down you will feel like an idiot for losing money quickly, get frustrated and dump the whole position a point or two down instead of using it to buy more. there is no right price. but if you build up your position in small increments picking up shares over weeks and

months you can avoid paying the wrong price. that's more important. back at my old hedge fund and for my charitable trust, actionownerstrust.com. i play with an open hand, not a poker face like lady gaga. uh-uh like wide scales on the way down. gibberish. so let me put it in english. buying with wide scales on the way down describes the way to purchase a declining stock or one you are afraid will go down while it approaches the bottom. get the right entry point for the long-term investment. this is the way to do it without getting discouraged. it's practically impossible to call a perfect bottom in an individual stock. uh rarely see it. we don't try to time the bottom i by buying all at once. the smart move, the way the pros do it and you should is to buy on the way down incrementally. this is insurance against the potential bad judgment thinking you know the stock is done going down and you want to be all in because you are so sure, so darn

sure you are getting in on the ground floor. you have to presume there is a basement if not several sub basements. this notion of scaling into a position helps you get around the difficultiy of timing the market. it is a trick. it's something i have used over time to get better prices. say you want 400 shares of caterpillar and it's at 90. you buy all of out at once and it's at 85. you feel like a stooge. not mo, larry or curly -- the dreaded shemp and you lost $2,000 in the blink of an eye. buy no more than 100 shares. wait for a pullback. wait for the market to bring it down. if it comes down to 85 rather than contemplating suicide you're thrilled to have a better entry point to buy another 100 shares. you buy the next hundred shares at 81 and put on the final hundred if it goes below 80. you have a good basis.

basis is price. the worst case scenario, caterpillar goes higher to the first hundred and you make a little money. that's what i call a high quality problem. when you decide to unload a stock, do it incrementally. oh, boy, i sold it all and it had a big move. eliminate that. you know about buying incrementally. let's talk about scales. if you are buying a stock sinking lower every day and that's okay. the company could be good. you can buy it with strict scales or wide scales. take caterpillar. for strict sales you would buy a thousand shares every time it loses a point. the essence of strict scales is you buy in the same increments. a point, three points, you purchase the same amount of stock. using strict scales is smart and responsible. sometimes you have a problem with it so i use wide scales when buying a falling stock, particularly one like

caterpillar. you buy larger positions as the stock goes lower. i used to think of out as a pyramid of buying. if the stock lost a point i would put on a thousand shares. another point, 1500. when it's so low you can hardly believe how poor the stock is trading, double down. it's about a pyramid structure of buying the best investors i have seen all use pyramid style. the great thing is wide scales leave you room to maneuver. when the stock bottoms you want to pour your money in and you can buy the greatest number of shares a at the lowest price. the best thing about long-term investing is you can be patient. when you like the fundamentals you can wait for a pull back or a sell off to accumulate a position in the stock as it goes down. make sure the story is still intact. do the homework. if the underlying company is broken the stock will never be a bargain no matter how low it falls. in that case you may need to abandon ship and find a better

one to travel. there is no sin in recognizing you made a mistake and you have the wrong stock. bottom line. in this game, few things are more important than price. trying to get a good basis. as a long-term investor you can wait for a good one. be patient. keep your bat on your shoulder. wait for the right pitch. never buy all at once. be sure to buy a stock with wider scales to get the best possible overall basis. joe in massachusetts. >> caller: boo-yah jim. uh i have a question on stop loss and limits and how an individual investor can use it to minimize losses and ride the ups and downs of a stock. >> i don't condone these. if you are going to try to get the right prices you have to stay on top of it. out's your money. you get a flash crash. you bought it at 80, it's at 70.

the market doesn't work well enough to do it anymore. it's too crazed. you've got to protect yourself from the market. from any market that acts as strangely because of high frequency trading. those old tricks, out the window. price matters. basis matters. don't buy all at once or sell all at once. keep doing the homework. stay with cramer. [ male announcer ] how do you trade?

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[ woman ] welcome to learning spanish in the car. you've got to be kidding me. this is good. vamanos. vamanos. vamanos. gracias. gracias. gracias. ♪ trece horas en el carro sin parar y no traes musica. mira entra y comprame unas papitas. [ male announcer ] get up to 795 miles per tank in the 2013 passat tdi clean diesel. that's the power of german engineering. see your local dealer for special lease and finance rates during the afor all event. the only way to generate strong returns year after year is by putting thought and effort into the price. anyone who says you can make money in stocks without keeping

track of short-term developments at the underlying companies is like a personal trainer who can say you can get in shape without exercise. here's a pill. it doesn't work. a substantial majority of the public believes the buy and hold nonsense is the only way to invest. i read about it all the time. no wonder stocks are hated. people are convinced if they buy blue chip stocks -- as if that means anything -- and they wait long enough those stocks will work their way up because it's a law of reverse gravitation they subscribe to. that's a lousy strategy, if you can call it that. in recent years, it's been really horrific. think about it. for the last five years, the middle of 2007 to 2012 s&p 500 declined 9%. things have gotten better in the last few years but when you look at the benchmark performance over the first decade of the new millennium s&p was down 24%. you only lost 9%. only nine. when you factor in reinvested

dividends which is why i'm always telling you to own high yielding dividend stocks. even factoring in dividends from 2000 through 2009 you were better off hiding money in a mattress than buying and holding stocks. the strategy didn't work. let me give you advice that could have spared you pain on a subject you almost never hear from the fraternal order of buy and hold. i want to talk about a forbidden term. some say it's a curse word. marks me as a charlatan. uh want to talk about selling. every stock you buy you should consider comes with an expiration date. radical. knowing when to sell stocks, is every bit as important as knowing when to buy. out's more critical. people make a huge number of selling related mistakes by panicking and selling into weakness or getting greedy and not selling at all. no one talks about selling except for me. if you get stocks at the ride

prices eventually you will have winners that are up big. the trick is not to go all in gordon gekko. greed isn't good. out's dangerous, horrible. [ booing ] bulls make money. short seller or so bears make money. pigs -- slaughtered, bacon. when you have a serious winner, even if you think it has years of gain left in it, take some profit. period. no discussion. you can let some of them ride but not all. you have to ring the register on some, a partial portion or position. otherwise your winners could be losers and that's huge. best to lock in profits while you have them by selling into strength. you haven't really won until you have taken something off the table. i'm making money. don't use that term "making" unless you are profiting. ringing the register. why am i putting stress when you need to unload the best

performing stocks you need to let run and never touch. you don't need me to tell you to sell the losers. when you own a stock and the company lets you down, maybe it's not playing out. maybe the economy takes a turn for the worse and the sector is out of favor. don't give them the benefit of the doubt. sell. first loss best loss. don't give a company a second chance to burn you. lots of people hang onto losers waiting for them to get back to even. they believe in buy and hold. even thoen they know the losers deserve to be sold they want to sell. they are just waiting too long for an unrealistic price given the downturn with the actual company. selling the losers makes perfect sense. selling winners is counterintuitive for you. you have to at least trim the biggest gainers. the first reason is simple. diversification. when you let the winners ride your position gets too big.

say you own a stock that's doubled and doubled. maybe you bought apple around 200. that stock represented 15% of the portfolio. it's a larger piece of the pie. even if other stocks have gone up a decent amount. you have too much exposure to even the single best stock and whatever sector the stock is in. you know my rules. you never want to have more than 20% of the portfolio in an individual sector. keeping all your eggs in one basket is dopey. you need to trim winners as they go higher so they aren't too large a piece of the portfolio. i'm not saying sell them all. that's what it will be interpreted as. it's not true. if you are investing for the long term you have time. you do it gradually. pieces. not all at once. as winners go higher sell off parts of the position. scale out slowly over time. never sell all at once. just like you never buy all at once. wait for moments of strength to get better prices as it goes up. don't wait too long to let your

portfolio get too weighted to one group. there is one more concept. that's the idea of playing with the house's money which i explain in one of my investing rules. when you own a stock that's had a huge run trim your position to the point -- this is your goal. not buy and hold. all the money invested in the stock comes from profits you have already made and not a penny from the original investment. one once you pare back winners to play with the house's money you can take more risk. that's the holy grail of investing. you can't lose. you're in a can't lose position. you can ride it all you want. never let it go. fine with me. that you can buy and hold. out's bought and paid for by the house's money. younger investors can let gains run for longer. why? those of us who are closer to retirement cannot afford turning big investment gains into losses. when you are young it's less important to preserve capital. you have your whole working life, all the paychecks coming

in. those of us in the older demographic, even if you are well preserved -- like myself. who would guess that i'm 60-something? you have to be more careful. trim the winners aggressively and ring the register more regularly than a younger investor. when investing for the long term you can't just hold stocks forever. you have to take profits. trim back winners so your portfolio stays diversified. take your capital out and play with the house's money. that's the only time i say you can buy and a hold. nick in kansas. nick. >> caller: hey, jim. i was just wondering, should we embrace the increasing popularity of etfs as a way to mitigate market volatilitvolati? if so, which ones would you recommend? >> the only one i would recommend is the gld. why? i want to own the best. one of the things i have learned

in my more than 30 years of investing is being able to pick which is better and which is worse. i can teach you and i know you will do it. daniel in texas. >> caller: hey, jim. a baylor bears boo-yah. >> i i want to do the show from there. one day. what's up? >> caller: i was in a real money portfolio management class and one of the tools of the trade was the p.e.g. ratio. specializing in i.t. i started looking at the price to cash flow and price to free cash flow to find the more valuable i.t. stocks. do you think the price to cash flow -- >> i'll tell you. i happen to like the p.e.g. ratio. uh like at myself when i'm analyzing and operating cash flow. that's the one thing no one can really jigger. operating cash flow that's growing to me -- and you're a student of business. you know how to look for it -- is a great way to measure a company's worth and its future.

with apologies to gordon, greed is not good. you have to lock in profits as stocks go up. you can't hold stocks forever unless you are playing with the house's money. the best position to be in is when all that's left is the profit the market has given to you. hen you can let it run forever. stay with cramer. [ male announcer ] when a major hospital wanted to provide better employee benefits while balancing the company's bottom line, their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. [ yawning sound ]

>> announcer: lightning round is sponsored by td ameritrade. [ bell ringing ] >> if you want to invest for the long term that means planning for your retirement. in the long run we all retire. that may not sound sexy but trying to put together money to be financially independent is what we do every night on "mad money." i'm sure you heard the basics of requirement planning. you have to contribute to your 401(k) plan and your individual account or ira. that's the conventional wisdom. it may be right but out's not helpful. tonight i have suggestions about what kinds of stocks you should buy with your retirement cash. first you need to know why everybody tells you to take advantage of the 401(k) and to fund your ira. these are tax-free vehicles.

you don't pay tax on the money you contribute. while the money is there you pay no money on profits. no capital gains or dividend tax. they can compound for years giving you much larger returns. you only pay taxes on the money when you withdraw it and then it's regular income taxes. that's a sweet deal. they do fluctuate over time. they have gone up and down. as much as i like the 401(k) plans and iras i have to stay something nobody else will say. most company 401(k) plans stink. they have high management fees and straif costs that eat into returns. they typically offer lousy choices for investments, not enough control over e th them. the 401(k) business to me is sometimes a racket for the managers. i'm upset about it but i'm helpless to stop it. ideally you want a diversified

portfolio of five to ten individual stocks. most 401(k) plans only let you choose from a limited menu between a couple dozen different mutual funds with some stocks, some bonds. best you can do is find a decent low cost index fund and put your 401(k) money there. given that the premise of "mad money" is so you can do better by picking individual stocks and managing your portfolio on your own with your own time frame. that makes a 401(k) a poorly designed vehicle. sometimes it feels like the whole system was set up to benefit the financial services industry, not you. given the way washington works it wouldn't surprise me. nevertheless as much as most 401(k) plans stink you should contribute to yours, even if you put it in cash. you have to take advantage of the tax blessed nature. these vehicles are too good to pass up plus many employers match your contributions and i believe in not turning down free money. first put in enough money in

your 401(k) to max out the company match and then stop. the rest of your retirement investing should happen in your ira until you hit the upper limit on what you are allowed to contribute in a given years. unlike a 401(k) the ira allows you to invest whatever way you want. it was $5,000 or $6,000. what should you buy? your best bet is to own many high yielding stocks i talk about all the time on the show. they provide the protection and generate income. there are a couple of wrinkles that make it different. as much as we like high yielders it doesn't work well for master limited partnerships. think of the pipeline stocks like kindermorgan. they are already tax advantaged as distributions are considered return of capital. you don't pay taxes until you sell the stock which i like. but there is a rule that if you buy too many of them in an account you could give up the

tax favored status, pay the irs taxes you wouldn't have paid if you bought the m.o.p.s in a regular brokerage account. same way you can get hit with mortgage backed bonds. reits tend to have high yields. you have to be careful of the mortgage reits. that's the group you want but consult your tax professional about m.o.p. and real estate trusts. otherwise plain old utilities and telcos we like. go for high yields. dividend has to be safe and the company better have earnings to cover the pay out. and we like the consistent track record of raising dividends. great for capital gains that are tax protected. bottom line, a huge part of long-term investing is retirement investing. and put money in a tax favored vehicle like an e.r.a. and invest in high yielding dividend stocks. the goal is to reinvest dividends and let them compound year after year without paying taxes until you withdraw your

money at the end. that's a terrific recipe for producing huge long-term returns. david in california. >> caller: i like your show, jim. >> thanks for calling in. >> caller: i was just wondering. you're probably at the institutional level. the ordinary individual can gain access to listen to the analyst question as well as management's response? >> a lot of times you can but you don't need it in real time. you can just go get the transcript. that's the uh way i do it. sometimes i do it in real time. sometimes on the show. i do the transcript on the way home, order the transcript at night and they are available everywhere. you can stop. that's the important thing. you can stop and think. you can't do it when you're listening to it live. long-term investing involves not only an e.r.a. but high yielding stocks. the right ones to put in. reinvest, build up over time, avoid the taxes by simply making sure you make the contributions

every year. stick with cramer. [ male announcer ] if you believe the mayan calendar, on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans?

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♪ i'm sexy and i know it >> here's a conundrum. how do you pick stocks for the long haul when sectors are going in and out of style in the wall street fashion show? how do you buy something to rack up gains when that's not the way the game works anymore. there are few stocks you can keep riding higher and higher. when you find them they are the holy grail of investing. those don't go in and out of vogue to stick with the fashion show analogy. all right. like i told you before, there is no such thing as the stock you

could own forever. that's the essence of the buy ond hold thinking that lost many people huge sums of following over the years. some winners are more lasting than others. there is a certain type of stock that can produce invebl gains and they can be owned more longer than what i regard as ordinary stocks. i'm talking about secular growth stocks. that's 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 it cyclical growth. a true secular growth story can deliver fantastic numbers, even a lousy economy. numbers so consistently good they can keep powering the stock higher quarter after quarter, year after year regardless of the economic environment. how do you spot a secular growth name? i like big picture themes. we have a company that's a play on a much broader trend. take the move to healthy eating

in the country and the embrace of natural and organic foods. it's made whole foods the go to supermarket into a power house stock that destroyed the regular supermarkets. even growth trends in the end have a limited shelf life. you see themes age and there are fewer plays that can consistently make you money. lasts longer but never just forever. years ago back when the smart phone was a recent invention and most people used dumb phones i talked about the power of the mobile internet tsunami. for a while there was a ton of money to be made. it was a reason to buy apple which never stopped being a terrific performer. it turned out not to be a license to buy the sector's weakest players which fell by the wayside as we learned.

a rising tide doesn't lift all ships. the ones with holes in them sink even with great secular trends. most of the time you can hang onto a stock for years f. you find a secular growth story. there is nothing wrong with owning the super high quality stocks for as long as the story stays intact. they won't be part of the wall street fashion show. it can be a long time. like life, even secular growth stocks don't last forever. while you may want to go for the greatest secular surf ride of all time, remember, even the biggest wave ends up crashing on the shore. only homework keeps you from crashing with it. larry in tennessee, please. larry. >> caller: is this james j. cramer? >> yes, it is. how are you? >> caller: i think i have read everything you wrote since 1998. thank you for helping me put my daughter through college and teaching the home gamers how to survive in this stuff.

>> you're terrific. thank you. >> caller: i had a question. tax season is coming up. you teach us to trade around the positions up and down. i wonder if you have advice for us coping with wash sales. >> that's a problem. that's why what i i will do on that question is i am going to tell people. i can't give individual tax advice. you have to speak to your tax consultant about when to take the sales and buy. you're right. there can be a wash sale problem. i don't want to speak broadly about it. it's individual to a person's tax control. no stock is forever. they come in and out of fashion all the time. some do last longer than others. those are the secular growth stories we live for. they have a longer shelf life and that's ultimately what we are trying to find. "mad money" back after the break. okay, here's the plan.

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all night i have been trying to walk you through what it does and doesn't mean to be a good long-term investor. i have one last point to make and it's this. there is nothing virtuous about long term investing. don't get hung up on the nomenclature. it's loaded with negativity. i'm not making judgments. we're here to make money.

i think picking long-term winners is more lucrative and it's an easier strategy. if you find your portfolio does better when you are managing your money more frequently, more power to you. i'm not going to judge you. never forget uh you do not have the horses to compete with the high frequency bandits or hedge funds with multi-million dollar research budgets to support trading operations. one reason i prefer longer term investing. at the end of the day they don't care if money was made in short term trades or not. we have seen them launder money, take money from iran. they won't draw the line at money made from trading stocks. the teller, presuming you can find a human isn't going to say, i can accept this deposit but not that one. it's dirty money from trading. money is money. here's the buy and hold talk. the fact is the only difference between trading and investing has to do with the time horizon. trades or positions you hold for

weeks or months and investments are positions you plan to be innen fer a year, year and a half. day trading is different. i can't encourage day trading. i think you will lose money. don't be fooled by trading and investing. you don't have to choose between sitting on holdings as an investor even when you feel you should take action or flitting in and out of holdings on a daily basis as a trader. you can do what you need to do to save money. find your own happy medium. no matter which path you choose, do your homework. stay on top of things nd you will do better than any mutual fund or hedge fund you could have at your disposal. only those trying to manage your money or take your money and their min i don't knows are the only ones who would disagree with the statement that says you can do it better yourself. stick with krarm. [ male announcer ] when this hotel added aflac

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