>> but it's okay because you'll make back the money. that you're losing. anyway, okay. sometimes that's true. i mean, it's not just losing money. but a bunch of short term losses don't magically transform into long-term gains. yes, money-making over the long haul is the ultimate goal in this game. it's also the ultimate excuse for short term things. and, believe me, that kind of thinking will only make you a worse investor. i've got to get rid of all of the alibis that you've been fed

for all of these years. at what point do you need to cover your ears and tie yourself to the mask alodisiuos. first and foremost, long-term investing is not the same as simply owning stocks for the long term. in other words, please don't confuse being a good inres tor with the idiotic etiology of buy and hold. this one bad idea has lost more money for people than the last two crises, unfinanced, combined. just because you're a long-term investor, it doesn't mean that you can afford to take loss after loss after loss. losses are losses, realized or unrealized. the notion does not justify damaged goods. the stocks of companies are in bad shape in the misguided hope.

well, hey, come on, man. it's got to come back if you hold it for the long term. once you purchase your stocks, you just wait. me, i've never liked waiting. and it also happens to be a terrible strategy, if you even think it is a strategy. that's why i'm always saying you have to take care of your investments after you buy them. much of the research can noi be found on the web. hey, it's your money. invest the tame in it. but you always have to pay attention. the moment you stop is the moment you start losing money. sometimes you can go to secular decline and your stocks never recover. you just have to get out before

the damage becomes too horrible. hey, just ask the people who rode down nokia or even radioshack. or in other words, being a long-term investor doesn't allow you to be a lazy investor. if there's one good thing the crash did, you can just buy and hold bank of america at 50. go ahead. as long as you don't pay too much attention. >> i can't have that happen. not on my watch here. in this brave new world, many of the other things have tried to change their tune.

that doesn't mean you should write off long-term investing, too. buy and hold doesn't always work. or just a wealth of investing. the kind of dividend play other that i highlight in my books. that said, you will never get any of those things if you use the con september of a long-term horizon as an excuse or alibi for bad performance. and holding stocks that can't even afford to pay their debts, let alone some of their

dividends. something that you won't even know about. or that it's not even worth trying. i can, on this show, teach you the disciplines and strategies that will provide long-term wealth, just as you remember i'm a long-term investor, in quote\s, is no excuse for not doing the homework or following the rules i laid down. if anything, being there for the long term requires more patience than the short term. don't throw away all the lessons i teach you. you're going to need them. to paraphrase that amateur investor gertrude stein, a loss is a loss is a loss, unrealized or otherwise. and don't you ever forget it. bill, in pennsylvania, bill?

>> caller: hey. >> speak up, bill. the floor is yours. >> caller: hey, i thought i was a rock star. i made a couple great trades. i made about 7 points in a week on one stock. another couple points on another only to have the stock run up another 10, 12, 14 points. do you have any advice on how i can realize the full potential and become more of an investor rather than a trader? >> okay, you have to label your stocks. you have to say it is a core position. you have to sell some. if it's a core position, i can sell someone a ramp. but not all of it. period. anoint your stocks. decide with your homework what should be core and then hold onto that core position. kim in california? >> caller: hi, jim. i just want to give you and your

staff props for recommending usairways. i'm a new investor and that stock is up over 10% for me. my question is, what's the difference between buying on a dip and buying on a pull back? and can you give us an idea of a dip? >> 3-5 is a dip. you know, down three, down five over a couple day, but 5-8% is a classic bull market skrex. and the correction, you say it's going to be wide first. the stock is at 12, put in a bid to buy some at 10. if it needs to be a correction, then it's going to be under 10. so 12-11 if it's going to be under a dip. if you get 10% down, that's

fine. if you get 20% down, you need some room. it's the right thing if it's done with homework and discipline. see, i labeled it long term. "mad money" will be right back.

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let's talk the price is right. i don't mean that game show. if you want to make money from your stocks, which i know you do, and it's absolutely critical that you buy them at the right price, not the wrong price when you paid too much for a

stock at the very beginning, we can't get enough of it here on "mad money." i think price is dramatically underrated wi you. i'm giving you the power of price that's due. it is incredible how unimportant people think that first buy is. so how do you find the best price to pull the trigger 1234 when y? when you're investing for the long haul, you have one advantage. i'm talking about time. as a long-term investor, you've got all the time in the world. you want to buy a stock because of the underlying prospects. you can drive up the stock price any time soon. you can afford to be patient. you can be pasht. you can wait for the stock to come down to your price. what you can do is keep your bat on your soulder and wait for your pitch.

of course, you're never going to get an all-clear signal telling you it's time to buy. maybe a 3-0 pitch comes in and it might be a ball. how exactly are you supposed to know how long you should wait before you pull that trigger? simp simple, you don't know. you buy one level and the stock goes down even further. most likely, you'll get frused. you'll hear people saying oh, gees, i'm down two bucks, jim. i want to sell. that's why i play with an open hand.

i always like to buy with wide skills on the way down. buying with wide scales on the way down describe it is way you should purchase a declining stock. you want to get the right entry point for a long-term investment. people are always telling me they caught the bottom. i think they're probably lying. particularly your insurance against potential bad thinking that you know the stock really is going down and you want to be all in. you're so sure that you're getting in on the ground floor. in this game, i've got to presume that there is a basement, if not several sub-basements. this notion of scaling in to a position on the way down is a trick that helps you get around the difficulty of timing the

market, exactly. hey, let's pick an example. let's say you want to buy four shares of caterpillar. if you buy one at 90 and it tips to 85, you're going to feel like a stoojs. you're going to feel like shemp! i don't even know if shemp was that stupid. then if the cap comes down to 85, you're contemplating suicide. buy the next hundred shares, 85, the cap drops to 81, you have an amazing price here. the worst case scenario, category goes higher than the initial. even if you don't have as many shares as you want. that's a high quality problem where i'm from. you only regret about selling it to the wrong person. we get calls all of the time.

i sold the stock at ten, it went to 15. what do i do? you should have scaled. you know about buying incrementally. if you buy a stock that's sinking lower and lower and lower every day, you can buy the shrink or the wide scales. let's stick with caterpillar. if you're using strict sales, let's say a thousand shares. you buy another thousand, you buy more. the essence of strict scales is you buy the same every time it goes down a point. you purchase the same amount of stock using strict scales. but someplace it can hurt you. that's why i often like to use wo wider scales. particularly cyclical stock. the trick with wide scales is is that you buy larger and larger positions. the first example i gave of caterpillar was 90. that was a strict scale. now, let's talk about a wider scale. i used to think of it as a pyramid.

it's so low and then you double down. see what i mean about the pyramid structure of buying? it's both work. you've got to get comfortable. now, the great thing about wide scales, they give you room to maneuver. you can wait for a market-wide pullback. just make sure the story is still intact, please? the stock is never going to be a bargain no matter how far the darn thing falls. in that case, you're doing to need an abandon ship. i am sorry it happens, but it happens every day. be patient. keep your bat on your shoulder. wait for the right pitch. remember, don't buy all at once. if you're trying to catch a

stock on the way down, be sure to buy it with strict scales or even better wide scales and build that period to get the best possible price. bill, in connecticut? >> booyah, jim. >> caller: booyah. >> caller: i own some stock and dividend reinvestments for over ten years. now i'm trying to determine how i can get a cost basis. >> you have to look at the average number of shares that you bought. and then i think your broker is going to have to help you on the cost basis. i'm not sure when they awarded. it's a great question. i'm not sure exactly, but my broker has -- i can't own individual stocks now, but always had an individual price when i wanted it. so i would go to your broker. anyway, price matters. put on that polka face and enjoy the luxury. clients are always learning more

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every stock you buy comes with an expiration date. especially your winners are every bit as important as knowing when to buy, buy, buy. look, in fact, it's actually more critical. so many people make such a huge number of selling-related mistakes. either by panicking or by getting greedy and not selling at all. if you pick the right stocks, eventually, you'll have some winners and go up big. greed is not good. it's dangerous. it's downright dangerous. when you've got a serious winner, even if you think it it still has many years of gains left in it, you've got to take

some profits off of it. i know you'll be tempted to let your winners run. but that ice a mistake. otherwise, your winners can become losers. it's best to lock in profits while you still have them. you haven't really won until you've taken something off the table. i know this is a totally antithetical position. but after what we've lived through, the destruction of so much old tech, just sitting on your big gains, it does seem a little foolish, doesn't it? i mean, if you could take something off the table, you'll be sure to never take a huge win off of a gargantuan loss. you don't need me to tell you to sell your losers. maybe the story isn't playing out as well as you expected. maybe management isn't executing. maybe the economy takes a turn

for the worse. don't get sentimental on me. just sell. better than giving a second chance to a company to burn you. >> losers were once big winners or they're waiting to get back to even before selling. but, even then, these people know that the losers deserve to be sold. and they want to sell. they're just waiting too long for an unrealistic price that's too high. hey, it will get back. i know if i just wait, it's like some plan. it's like water, it will eventually bloom but you have to at least trim. it can get so big. maybe it just doubled. apple. they just bought apple in the 200s, okay. it goes up huge.

that is going to represent a much larger piece of the pie, even if the other stocks have gone up a decent amount. at that point, you have too much exposure to whatever sector it was in. they sold apple and it's double, almost triple its price of where we bought it. totally because of discipline. we weren't clairvoyant about what was going to happen at apple. but this one always trumps conviction. keeping all of your eggs in one basket is going to get you in trouble. if you're investing for the long term, you've got time to do this gradually. as your winners go off harder,

you've got to sell your position. never sell all at once or buy all at once. try to wait for moments of strength. but don't wait too long. you don't want your portfolio to become too heavily waited toward any one group. it's the idea of playing with the house's money. i explained it a couple of books ago. you want to trim to the point where all the money you've invested in that stock comes from profits you've already made. and not a penny come frs your original investment. once you pair back your winners, you can afford to take far more risk with what's left. you can let that run forever, i don't care. that's the holy grail to investing people. you can't lose. you can ride it all you want, never let it go, if that's what you like. oh, and one last thing. investors can let their gains

run for older investors. the fact is, it's too late in the game. when you're young, it's less important. you've got your whole working life to make it up in your regular job. those of us in the older demographic, even if you're extraordinary diverse like myself. you've got to be more careful. that means trimming your winners more aggressively and ringing the register more regularly than any young investor might do. you can't just hold stocks forever. you've got to remember to take your profit. and, when you can, try to take all of your invested capital out and just play with the house's money. >> house of pleasure. >> i need to speak to skip in texas. >> this is skip. >> hey, skip, want's up? >> hey, jim, i've noticed whenever callers ask about your advice for buying gold, you always state your preferences

for gold coin followed by bullion and then stocks. >> i prefer coins because you can store them very easily in your safety deposit box. the gold stocks have just been horrendous. they're not correlating with gold at all. they're a huge mistake. let's two to samantha in new york. >> hi, jim, so excited to talk to you. love your show. have a big booyah for you. so here's my question. i'm 22, but my job doesn't offer 401 k or any type of retirement account. i want to start investing with the little money i have. >> i think that sounds great. >> okay. do i start investing with speculative stocks? >> you're only 22. i want you to mix it up. i want you, for 20% of your capital. but for 80%, i want a dividend,

i want a farm. i want some bull work names. if you tell me that you've got great specks, i'm willing to take it up to 30 37b9. %. congratulations for being 22 and wanting to invest. that's how you get really wealthy. we take lessons where ever we can find them. when it comes to long-term investing, you've got to know when to fold them, when to hold them and when to sell-sell-sell.

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if you want to invest for the long term, then, like it or not, it means planning for retirement. in the long run, we all retire. i know it may not sound sex si. but, believe me, trying to gain enough money to become financially independent, that's what this is all about. you've got to contribute to your 401(k) plan. it's actually right. it's helpful. so, tonight, instead of telling you to park some money in your i.r.a., i'm going to give you some suggestions on what you should buy with your retirement

cash. first, everyone tells you to fund your i.r.a. the money you put in a 401(k) comes from your pre-tax money. you pay no taxings on your profits. no capital gains tax. no dividends. tax free gives you much larger returns over decades and decades. you only pay taxes when the money is withdrawn. and then it's taxes with regular income, just for once. that's a sweet deal. see if you're worried on tax rates, dividends or capital gains with a lot of people. it turned out you didn't have to, but many people were worried about it. however, as much as i like them, i've got to tell you something that almost nobody else is going to come out and say. most company plans, they stink. if my management fees and administrative costs, typically,

the returns are low. and they offer you not nearly enough control over them. the 401(k) is for business. i can't believe i just said that, but it's true. ideally, you want to diversify your own money. often, they let you choose between no more than a couple individual funds. that's fine for me. but i'd like to have a little more variety. some stock funlds, that's all they offer. the best you can do is find a decent, low-cost index fun. put your 401(k) money 234 there. sometimes it feels like the whole system was set up to benefit the financial department. not you.

never the less, as much as most 401(k) plans stink, you should take advantage of it. these are just too good to pass up. plus, many employers will match your 401(k) contributions. so the first thing you should do is put in enough money to match out the company match, 23 you have one, and then stop. and then the rest should happen in your i.r.a. until you hit the upper limit of what you're allowed to limit. the i.r.a. gives you the freedom to invest your money in whatever way you want. what should you buy in your ichlt r.a.? like i tell you in "getting back to even" your best bet is to own high-yield stocks. as much as we like high yielders, you don't want to buy mass limit pipelines. the reason?

mlp is already tax advantages. you could end up giving up that and paying bigger taxes. it's just not worth it. it's too hard. too many people said jim, it's too hard. the same rule can hit you with certain real estate investments. but, in general, we send out higher yields that are worth your i.r.a. consult your tax professional. that's all up to the individual. beyond that, you're looking for high-yielding stocks. a company better have enough earnings to cover the pay out. these can be powerful contributors over time.

even as they might seem sleepy over the dividend stocks. those can pan out. don't be afraid of owning plain old beering utilities. the con-eds and the dukes. they've made you more money if you've reinvested them. the best way to prepare for your retirement is putting mu intinga tax-favored vehicle. the goal here is to be able to reinvest your dividends, let them compound year after year after year without paying any taxes until you enjoy your money at the end. that's a terrific recipe. i cannot believe people don't have an i.r.a.? or they don't have a 401(k) that's just plain wrong. stick with cramer.

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how on earth are you supposed to pick stocks for the long haul when things are constantly going in and out of fashion? that's simply not the way this game works most of the time. there are very few stocks that can just keep riding higher and higher, year after year. but when you find them, they are the holy grail of investing and they almost never go out of vote. just stick with that fashion show now.

like i told you before, there's no such thing of a stock that you can own forever. that's what lost so many people so many huge sums over such a long time. there's a certain type of stock that can produce incredible gains. i'm talking about secular growth stocks. a rare breed that you should always be on the look out for. most companies need a healthy economy to thrive. we call those cyclical stocks. but a true, secular growth story can sdlif erdeliver fantastic n.

take the move toward healthier food. it's worked for companies that harness the internet, companies like netflix, amazon, of course, google. of these, i think google has the most staying power because it has the most earnings power. never forget that. that's the holy trinity of secular growth. hey, years ago, when the smartphone was still a relatively recent invention, i was talking a lot about the power of a tsunami. you couldn't even buy the third best because the rising ted lifted everything.

apple can thrive when the theme runs out of gas. the fact that apple can go down and go down hard reminds you that nothing laughs forever. it's a recognition of something that was once a secular grower. it may have become much more world hostage to economies. pcs used to be secular growers. in my former years as hedge fund manager, nothing could compare to merck, pfizer. the past 20 years, they've become like utility ins the growth characteristics. here's the bottom line. if you find a secular growth stock, it's the same thing that's pushing up a whole foods or a google.

there's nothing wrong with owning these super-high quality stocks for a very long time. but just like life, secular hope doesn't last forever. jason, in maryland, how are you? >> caller: i'm just fine. i was wondering about small, medium and large benefits. what are the benefits and time of each one? >> large cap might include that it has a good balance sheet.

large caps may be better. diamonds may be forever, but stocks are not. when we made our commitment to the gulf, bp had two big goals:

help the gulf recover, and learn from what happened so we could be a better, safer energy company. i've been with bp for 24 years. i was part of the team that helped deliver on our commitments to the gulf - and i can tell you, safety is at the heart of everything we do. we've added cutting-edge safety equipment and technology, like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all our drilling activity, twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. safety is a vital part of bp's commitment to america - and to the nearly 250,000 people who work with us here. we invest more in the u.s. than anywhere else in the world. over fifty-five billion dollars here in the last five years - making bp america's largest energy investor. our commitment has never been stronger.

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all night, i've been trying

to walk you through what it means and doesn't mean to be a good long-term investor. don't get too hung up on the nomenclature. it's become a lonely and dirty word. is it somewhat immoral? you know what, that's silly. we're here to make money. i happen to think it's more lucrative. and it's also an easier strategy. you're busy working all day. but if you find that your portfolio does better when you're managing your money, meaning trading in and out of stocks more frequently. more power to you. although, never forget you do not have the horses to compete with the multi-million dollar budget. at the end of the day, they don't ask. we've seen banks launder drug money from mexican cartels.

they're not going to draw the line from money you made in stocks. they're not going to say hey, i can't accept this deposit. hey, not that way. this way, it's dirty money from trading. so take it from somewhere else. money is money. but here's some of the statements called the only money worth making is worth investing. trades are positions you want to hold for a shortened period of time. investments are there for say a year, year and a half. don't be fooled by the false dichotomy between trading and investing. even if you feel like you should be floating out on a whole. you could do both. no matter which path you choose or both, be true to your tis plins. do your homework.

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long term investing. i's not a way to say i shouldn't care. it's a way to care more. i'm jim cramer. and i will see you next time. >> working in a prison is really tough. it is not for everybody. >> when you have gangs involved, if you don't do what you're asked, then you would get beat up. >> the biggest prison in the state of idaho is also the toughest. the idaho correctional center, the i.c.c., was so violent that employees and inmates had a name for the place -- gladiator school. >> and that was because of the assaults. and that's why they called it gladiator school, becaus