making a mistake. buy it off cmg. >> by the way, big check here. yahoo! still higher in the session. see you again storm for more "fast money." meantime "mad money" starts right now. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere. and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want the to make friends. i just want to make you money. my job is to educate and teach you. call me at 1-800-743-cnbc or tweet me @jimcramer. tonight i want to take a step back. and talk about the big picture. my ultimate goal on the show is as always is to teach you how to

be better at managing your money, not just investing. every aspect of oh your financial life. sometimes that means we need to take a deep breath step back from the nitty-gritty of the market and focus on the educational side of oh things. what i call investing 101. honestly if any university was crazy enough to give me tenure i could teach an entire semester's worth of classics on the basics. that presupposes that any institution of higher education in america would be interested in teaching you how to manage your money. a topic that's a little too quotidian for the ivory tower type that is run clengs. most colleges are more interested in taking your money than making you money. that's why you can take an checks class without learning how to balance your checkbook. so. what's the first item on the syllabus? we need to talk about savings. if you don't save your money you

would spend your life as a slave to your paycheck. or hostage to the social security system. if you're in your 20s, who knows if social security will be around when you need it. more importantly, i can't teach you how to invest if you don't have any money to invest. it's crucial to save consistently. look, i'm not going to tell you the reasons it makes sense to save money. you don't need one more person badgering you about the obvious. one day you will need it whether to buy a ouser or retire on more than social security, which you will need hr than. trust me. when you hit retirement social security won't be enough. plus social security can be altered or taken away by washington which makes it unreliable. it wasn't so long ago the president and congress were willing to change the way social security keeps up with inflation, something that would have meant serious cuts in benefits for those of you who expect to collect them 20 to 30

years from now. the changes didn't actually happen. nobody in washington can agree on oh anything anyway. if things get more amicable in the caple tall like one party thing, you should be prepared for them to tinker with social security. i have to tell you i don't think it will be in a good way. that's all thing thatting i will do tonight. okay? honestly. from my perspective the best reason to save is not that it ensures you have to subsist on cat food in your old age. no. the real reason to save money which may do a better job of motivating many of oh you is for the vast majority of people you will never get rich from your paycheck alone. that's just a fact. for everybody who is worried about income inequality or the growing lack of social mobility there is not much you can do to fix the system of late stage capitalism on your ownment there are still ways you can help yourself. mainly, increase your wealth dramt cally by saving part of

your paycheck and invest the money in stocks. as long as you i vest wisely. if you don't saver or oh don't save enough you are at best a hostage to the paycheck your job and your boss. living paycheck to paycheck you don't have the option of quitting. even if it's horrible and your employer is the biggest jerk in the world. your only options are to keep doing something that makes you miserable or go broke and lose everything including your home which is even more miserable as i can tell you from personal experience. the back seat of your car is a lousy place to live. confessions of a street addict. i don't need to go over it more. i know of what i speak. if you save and invest your un money, grow your assets ander for those of you in the dark i suggest you get "get rich carefully" and you will have financial independence. you won't be hostage to anybody which makes life enjoyable. it may not be fair. we live in a world where wealth

is synonymous with freedom which is pretty good reason to save 15% of your paycheck if you can afford to. at least 10% if you're strapped for cash. once you start saving you have to know where to put it. that's an issue we don't spend enough time talking about. say you are saving 15% of your income. where should you invest? that's optimal. how much should go into a tax favored retirement account like 401(k) or ira, how much into a regular breast cancer kaj accounts? tees are questions i get all the time. let me tell you. my rule of thumb is invest for re tiermt first. to bet against retirement is a bet against your own longevity. for those of oh you still decades away from retirement age put half to two-thirds of savings in retirement like a 401(k). or an individual retirement account. remember these are tax favored vehicles. you don't epee income tax on the

money you contribute. you don't pay taxes on your profits within the account. you only pay taxes once you decide to withdraw the money after you have retired at which point are withdrawals are taxed as ordinary income. i have told you how to use the retirement accounts before. i will not belabor the point p. half the two thirds of savings goes to retirement. what about the rest of the money? that goes into your discretionarier or mad money account. that's aer normal brokerage account. i recommend an online one. the rise of oh 401(k) and ira plans means your retirement money gets special tax benefits. you can't take advantage of them with money you intend to spend before retirement unless you are using a roth ira. with a roth your contributions are taxed going in. you are allowed to withdraw early without penalty you can still get hit with a penalty for withdrawing profits early. if you don't feel like you have

the capital to have two accounts, then a roth ira is a good way to square that circle. especially since the roth is more favorable to younger people with lowerer income than a regular ira. there is a second reason i recommend using two different portfolios. you are suppose ed to take fewer risks with retirement money. you can take more risks in discretionary mad money but enwhen you're young there is much less difference. if you are the anyone of 30 you can take risks with your money. as i tell you all the time you've got your whole life ahead of you to make back any losses. ♪ hallelujah ♪ >> here's the bottom line. don't think about saving money as the mature responsible, prudent way to have comfortable future. no. think about savings as the fuel for your investments in the stock market. when done correctly they could free you from a paycheck and make you especially rich. that's why you should have a retirement portfolio to make

sure you have money once you stop working. you should also have a discretionary portfolio where you can take more risk and use gains to have fun before you turn 65. deborah in california. >> hi jim. thanks so much for the show. love it. >> of course oh. thank you so much. >> my question is i frequently hear you and other analysts say to buy a stock on a pull-back. >> right. >> but nobody ever says how to determine how much of a pull-back we should be looking for. how do i determine when it is -- how far it has to pull back? >> this is a great question. i have an answer. i say it's a 5 to 8% from the 52-week high is where i would start the. that's what i have been doing for action owners plus.com. i don't like to get started before then because i don't want to risk that the next move down will force my hand. 5 to 8% and a little bit of room

rather than 2 to 3% down. 5 to 8 is my rule. alan in new york. >> caller: boo-yah, professor cramer. >> thanks for the degree. how can i help? >> caller: i know you always say when you are ahead you should take profits off the table. when you have profit on core holdings that still have big upside do you keep or sell and invest in shg else? -- something else? what would you do? >> my goal since i started investing my first trade in 1978 is to play with the house's money. take your time scaling out of a core holding. you can even tab it as a franchise player. when you have a double i need some money to come off. when you have another double you need money to come off. the goal is to play with the house's money and never touch it again. because you can't lose. that's the way it should be played. trust me. that's how it's done. debbie in idaho.

>> i hi jim. we have been getting those invitations for dinner and a financial presentation that usually includes a free consultation. while we have been successful at accumulating money in our 401(k)s over the years with the assistance of oh somebody we trust we have moved and we are considering a change. so we are now getting close to 60 years old and are looking for a different plan, one that includes income distribution social security maximization and tax savings. what should we look for in a financial or adviser at this stage of our life? >> okay-oh. you have got to get invested in your community. a civic activity. a ymca -- which i support -- some organization locally. and then get some feedback. i demand that people have some sort of contact with friends who use these people.

because referrals are the only way to be sure. not advertising. not seminars but referrals. okay. a penny saved is a penny earneded. think about your savings as a fuel for investments. you don't have to be held hostage to your paycheck. "mad money" will be right back. tonight, how many is too many? find out how many stocks you should own and i will sow you how to master the art of diversification. then what's a stock worth? i will show you how to figure it out. plus a lesson on how much cash you should carry in your portfolio. why don't you stick with cramer? don't miss a second of "mad money." follow @jimcramer on twitter. #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.

mr. cramer love the show uh. >> we appreciate you out there. >> my kids are in elementary school learning so much. >> boo-yah. >> i foe you hear it all the

time. thank you, thank you. >> this is my best year by far and away in the market. >> i want to thank you for looking out for the regular guys out there. >> i'm trying to teach people to be better investors. i'm doing my best. that's the goal. >> great to hear your voice and know you're therer for us. i kicked off the show by telling you that you should save 15% of your paycheck and split that money between a more conservative retirement portfolio using a 401(k) or oh ira and a more aggressive "mad money" portfolio you can manage out of a regular account. beyond dividing savings into two streams how do you get involved in the sparkt? where uh do you begin? my short answer -- and i know it will sound glib but i'm serious. buy "get rich carefully" and read it. i wrote the book to teach you

how to invest in the not so brave new world with. how about the longer answer? less promotional. for starters i believe that a diversified portfolio of 5 to 10 individual stocks is the best way to go. you can do the index fund but this is the other oh part. before you start picking stocks you need to forget everything you have heard about the classic piece of so-called inare vesting wisdom buy and hold. we don't buy and hold on "mad money." that's a great way to lose your shirt. we practice buying and doing homework once we have bought. buy and homework. that heens if you pick individual stocks you have to be willing to read a company's s.e.c. filings and the annual report which i love. i devour those. the conference calls. you have to do that. the most important element of oh homework is going over the earnings reports. not just the earnings releasement you have to read the transcripts of the calls. they are so readily available, they are everywhere on the web. there is no better source of information than the calls. now it's easy to read or listen

to them on oh line. you also need to research the company sector. try to figure out if there is a good -- if it is a good moment in the business cycle to own things in the industry you are looking at. compare the stock to its competitors to see if the valuation makes sense or maybe something else is a more attractive buy in that exact same sector. if you're not willing to put in at least that much work nope. i don't want you to do itment i want you to stay away from owning individual stocks. this is jim cramer saying it. mr. stock is telling you i don't want you to touch stocks. investing like everything else in life takes effort to do a good job. i'm not trying to guilt trip you into spending more time doing your homework. a lot of people who don't have the time or oh inclination to do the individual stock research i believe is so essential . if you're one of those people who lack it is time or interest please don't try to wing with it. i will give you a good alternative in a second. and have a meaningful divert identified portfolio of five

stocks you need $10,000. until you have that much there is not much point going into individual stocks. where should you invest if you don't have $10,000 or you don't have time to manage a portfolio of at least five stocks? put your money in an index fund. yes, i'm endorsing index funds. mr. stock is endorsing mr. index. specifically you want a cheap one with low fees that mirrors the s&p 500 so you have ex poe sure to american equities over the long term. now you will never beat the market with an index fund. the idea is that an index fund is the market. if you put your money in a fund that mirrors the s&p 500 you will have the same benchmark performance. the performance exactly like what the s&p gives you minus the fees you have to pay to the fund administrator. that'ses why i say picking your stocks is the best option. for those who can't commit to stock picking for whatever reason keeping your money in an index fund that mirror it is s&p

500 is a reasonable responsible way to go. i happen to like the vanguard 500. that's vfinx. low fees in that one with. if you have the time and inclination for individual stocks the first step is to build that diversified portfolio i mentioned earlier. i'm always getting questions about what constitutes a diversified portfolio and what to put in it. let me spell it out. diversification is simple. people are tempted to forget it which is why we try to play am i diversified every week on the show. in a nutshell you are diversified with no more than 25% of the portfolio in the same sector. diversification is important because if something happen s that crushes one particular group of oh stocks you don't want to eviscerate your portfolio. i have seen too many people put their eggs in one basket and when the basket broke they lost everything. we saw it in 2000 in tech in 2008 with commoditiesment 2009 with the banks.

the juicy yields people couldn't resist. don't make that mess take. you need main multiple of five stocks. anything less and you will break the 20% rule. the rule of thumb is you don't want to own more than ten because you have to do way too much homework to keep up with them. with more than ten you will be running your own mutual fund. that's hard on anyone with a full-time job let alone the desire to have even the illusion of apparently life. let me give you an example. first you might want a tech company riding social, mobile and cloud. second a pipeline company to play the tremendous surge in domestic oil and gas. get a little yield. third, perhaps a health care name like biotech, a big pharma company with a solid yieldment i talk about bristol-myers. tourth a retailer and fifth, an entertainment stock. tech, energy retail entertainment. that's what a diversified portfolio looks like. if you are just getting started as an individual inves tor, remember, to own individual

stocks, you need to do homework on each. you've got to stay diversified. keep your money spread out among at least five sectors. there is mucher more "mad money" i ahead including the manufacturers that determine a stock's price tag. the actual what you pay. the dollar amount. i will help you understand what a holding is worth. solving the cash conundrum. how much should you hold? plus everyone should pay your taxes. are you giving the government too much money? i will help you keep what's yours. stick with cramer.

why am i taking a step back tonight to focus on the basics of investing 101? because with very few exceptions almost nobody tries to teach this stuff. you can get a graduate degree without knowing how to read a credit card bill or bank statement. it's driving me nuts. that's why i'm trying to teach -- well it's why i teach you all about how to handle your finances and the basics of oh investing. the stuff we normally gloss over in the quest to find you the next bull market. obviously that's what "mad money" is about. sometimes we have to step back and do it right, get you grounding. you know. we have talked about setting something aside for retirement. we talked about homework and diversification. why you should own a portfolio

of 5 to 10 stocks. let's talk about something we don't talk about enough at all really. it's hard and sometimes boring but i will make it exciting for you. let's talk valuation. when you are picking stocks to fill out your portfolio, how do you tell waes cheap? you hear me say that's cheap, that's expensive. how do you compare stocks to see which is more richly valued? as i have told you you never judge a stock by the actual dollar price. it's meaningless. you judge stocks by the price to earn ings multiple or p.e. if a stock is at $1,000 is that worth double what a stock is at $500? no! valuation is a concept i use all the time on "mad money" to show how we value stocks. tonight i want to spell it out in detailment to understand that cow don't need to know any math. elementary school arithmetic. here we go. the price of a stock is called p. divided by earnings per share, that's e. equals m.

the price to earnings multiple. m. it's the pe multiple. when i say the earnings i mean look at the earnings estimates for the mention year. valuing stocks is about the future, not the past. we use the future earnings estimates because it's what the major incity tuitions look at. the multiple is not the share price. what makes ss an attractive multiple? ten times earnings? 15, 20? this is all relative. there is no price to earnings multiple that's always attractive. the reason we use the price to earns multiple to value stocks is because it gives us the apples to apple way to compare one stock with another. let's say general mills. a cereal company. trading at 16 times earnings. while competitive cereal company kellogg's is 15 times. does that men general mills is more expensive? not necessarily. this is where things get

complicated. the price to earnings multiple doesn't give you nearly enough information to assess a stock's va. the multiple tells you what investors are pay a paing for a company's future earnings stream but it doesn't tell you why. let's consider the case of sales force.com. the king of cloud computing. that sells for more than 75 times earningsment does that mean per se that sales force.com is super expensive versus general mills? it may seem like it but no. in reel al ti the comparison doesn't make sense. general mills is a consistent but slow growing consumer staple play with bountiful dividend while sales force.com is a rapidly growing cloud based software service company. the two companies just are in different leagues. they are also playing a different game. the reason is growth. remember, when i said the price to earnings multiple measures what investors are willing to pay for the future earnings stream future is the key word.

general mills is a slow grower. the company has a long term growth trade of 6.5% so the earnings should increase by 6.5% annually. investors won't pay a nose bleed valuation. it doesn't grow that fast. sales force.com has a long term growth rate of oh fearly 30%. that means three or four years down the road the earnings will be much larger than now which is why investors pay up. really pay up. that's how they get the 75 times price to earnings multiple. when you are assessing a stock based on the multiple you always a, always have to consider that multiple versus the growth rate. generally speaking stocks with faster growth will have higher price to earnings multiples. it's not an exact science. the growth rate is definitely the most important factor which brings me to a new valuation metric that underpins our show. it's what's known as the p.e.g.

ratio. this underpins all of "mad money." it's the price to earnings to growth rate. this is a way of relating the p.e. multiple to the growth rate. it's not complicated. you just divide the multiple -- right, the price to earnings multile pl -- by the long term growth rate of the company. we are driven by p.e.g. rates on stocks when we make our judgments and comparisons. when it comes to the p.e.g. ratio we can talk in absolute terps about a good number and a bad number. my rule of thumb, a guideline i have arrived at based on three decades of trading and investing is that i don't like to payer more than two times a company's growth rate for a given stock. any stock with a peg ratio of more than two i just say no i'm not going to touch it. if a company has a 10% growth rate trading at more than 20 times earnings i'm generally inclined to say -- >> don't buy. >> it's too expensive. that's the only rule of thumb.

sometimes the opportunity is so great you have to suspend traditional valuational analysis. in 2013 momentum stocks soared without any regard for the price to earnings multiples. in spring of 2014 they fell out of favor before bouncing back slightly. sometimes there are companies that look expensive on near term earnings but are cheap based on the out years. 2016, 17 18. by the same token i consider any stock at less than 1% i consider that cheap. that said many stocks deserve to be cheap and some are value traps that only get cheaper. when you see a high quality company selling for less than one times its growth rate it might be a long term buy. priceline, a company people are saying that sounds expensive sometimes sells for 18 times earns but as a 20 oh% growth rate. if the dollar share price scares you away just divide everything by ten. it won't seem so fright ing.

here's the bottom line. for those of you new to the game we use the price to earns hult pl to value stocks in relation to each other. whenner you are making a valuation comparison you have to consider the growth rate too. if you only take one thing away from this segment, just remember that you can't value stocks in a vacuum. you can only value them in relation to each other and the index overall. herb in florida. herb. >> caller: sunny florida boo-yah, jim. >> sweet. i wish i were there. >> caller: from the west coast. listen jim, i have become a little bit of a cramer-holic since retirement. >> thank you. >> caller: i'm raised -- i raised cash preparing for a correction then went on a bit of a shopping spree. >> okay. >> caller: i messed up on one of the prime directives of trying to keep it under ten and i find myself with 45 positions.

>> wow. >> caller: all of them -- i go through them regularly. looking for the weak ones and i can't find one. >> here's what you have to do and what we do for action owners plus.com. i'm not asking you to randomly sell. rate them on one is a buy meaning you want to buy more. two if it comes in you want to buy. three if it rallies sell and four sell right now. peel off the fours. then peel off the threes. i don't think you should be able to manage more than 20 stocks sir. you just can't. i can do 15 to 20 in depth. but when we get over 30 we stretch ourselves. don't be stretched. fred in utah. fred. >> caller: yes. i want to know what ebitda was and why it is important. >> earnings before interest taxes depreciation amortization. when you have a company that spend as lot of money to do certain things that has to be

dpreech yated. it gives you a true look at what the money coming in. another way is look at what the company has at the beginning of the year. that's another way to value to see whether the company is losing money or making money which is why we use ebitda for a better depiction than what we can get from straight earns per share. stocks people aren't valued in a vacuum uh but in relation to each other. we use the price to earnings put pl and alwayser consider the stock's growth rate with it to factor in the price. much more ahead. they say cash is king. how much should you hold in your portfolio? don't miss my take. and uncle sam is hungry. i will help you make sure you are not feeding him too much of your hard earned money. plus i'm taking on your tweets. so stick with cramer.

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i have already told you all about the need to have a diversified portfolio of at least five stocks. some people want more and that's difficult. there is something else you should have in your portfolio and that's cash. yep. cash is the fuel that lets you buy stock ises into weakness how we like to buy on "mad money." you can't buy low if all your money is already committed at higher levels. how much cash should you keep in your portfolio so you can pounce during the market's next moment of weakness? and you know they always come along. first of all your best chance to prepare for the market's next sell-off is when the averages are riding high. the best way to do it is by stockpiling cash in you are your portfolio. we sell strength on this show, not weakness. before we get into the actual

amount of cash you should have ready, let me make one thing clear. you should always have some cash in you are your portfolio. in fact you might say there are moments when cash is your most important position. too many of the people i talk to are fully invested all the time so they have 100% of the portfolio in stocks or bonds. some are even reckless enough to borrow money to own stocks. [ buzzer ] >> boo! >> like you can live in them when they go bad. be ing fully invested is something you should never do. having no cash in the portfolio removes your flexibility and borrowing money to buy stocks using margin, who doouchk do you think you are to be that confident, that brazen, that foolish? usinger margin is the height of arrogance. it is bound to get you in trouble pt don't do it. i know many brokers encourage such borrowing because they can make money off you. okay. so how much cash exactly should you leave in the portfolio at any time?

that varies. from my charitable trust at action ownerers plus.com which is a paid service as part of the street.com i like my cash above 5% of the portfolio. anything below that and the trust might as well be running on empty when we have a decline. try to have the 5% as the minimum so you are ready for the next beg sell-off. it gives you enough money to take advantage of the opportunity. how do we figure out what's the right amount of cash in a particular moment? this is something that's counterintuitive which is why i devoted a segment to explaining it. the higher the stock market goes the more cash you should be keeping on the sidelines. you heard me right. when everything is roaring, when the averages have had an incredible run, when stocks are making a killing that's the moment when you actually want to increase your portfolio's cash position. >> sell, sell. >> how does that make sense? shouldn't you want hr more exposure to stocks when the market is on fire? remember, the reason you need cash in the first place.

it's so you can be in a position to buy more stocks the next time it get as pull-back. you need cash in your portfolio to take advantage of the pull-backs in the market and there are always going to be pull backs. the best time to raise cash is when the market is moving. if you wait for a sell-off you're going to end up selling stocks at lower prices. perhaps at the exact moment when you should be buying them. after a big run that's taking the averages up to their all-time highs, doesn't have to hit them but it makes sense to err on the higher side. raise your cash position to 10% or more if you are concerned the rally could be on its last legs. you should always be thinking that could be the case. uh you may feel like keeping a large cash position could cause you to miss out on uh upside. the point is the next time we catch a downdraft you can quickly put the cash to work. buy pr of your favorite stocks at lowerer, more attractive prices. keep in mind there is always another sell-off. i have to pound that in. when the next one happens you don't want to be caught with

your pants down. is there ever a moment when it makes sense oh put your cash to work oh? there are times when you want to be fully invested, when you should pour your cash into stocks but it's rare. like the haines moment. we don't get many of those. my rule is you only put all your cash to work of a decline of at least 10% in the s&p 500. for example when the s&p plunged roughly 6% from late december of 2013 to the lows of oh late february 2014 that would have been a moment to move a big chunk of your cash into stocks. that wasn't a 10% decline so you should have kept cash on the sideline it is in case the market went lowerment when i tell you to keep 5% of the portfolio in cash that 5% cash position is there precisely so you can use it to take advantage of the next 10% decline in the averages. or 10% decline in your favorite stocks. hopefully you have to wait a long time for that to happen.

when with it does be prepared. a lot of oh my favorite stocks have been down 10% and it's been the right time to buy not sell. why am i emphatic about cash in the fort folio by keeping a cash position at the ready so my hedge fund could pounce on market declines i tripled the performance of the averages after all fees for 14 years. i was able to triple. it's not just wow, you can never beat it. i did. living and breathing embodiment. it was cash that made me king. bottom line. never under estimate the importance of cash in the portfolio. you need it to quickly and carefully buy stocks in weakness. if you are fully invested use the market's next updraft to sell stocks into strength that's the discipline you need to practice to be a good investor. you know what else you can call it? hmm, buy low and sell high. has that ever gone out of style?

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tonight i'm trying to focus on the big picture issues involved in managing your money. i 'mle calling it investing 101. when we are tealing with financial planning we have to think about the inevitable things in life. no i'm not referring to death. talk about end of life setting up a living will too morbid for me. i'm talking about taxes which is arguably or oh maybe worse than death. a lot of people wait until the end of the year or oh right up to the april 15 tax return deadline before they talk about tax planning. the truth is tax planning is something you need to understand and you understand year round. why? because of the difference between how we tax long-term and short-term capital gains. the capital gains issues has troubled investors for ages. if you buy a stock and sell less than a year later it is taxed at the ordinary income rate which is as high as 39.6%, thank you mr. president for bringing the top rate back. >> boo!

>> i mean it as insincerely as possible. if you hold a stock for over a year suddenly it is a long term capital gains. the long-term capital gain rate is just 15% for most people but if you are in a higher tax bracket it's 20%, still cheaper than the 39.6% you could epeen oh capital gains. if and there is a 3.8% surtax on what you have to pay on the net investment income or modified adjust in gross income so the actual long term gains rate might be 23.8% in cases. that's lower than a short term cap gains rater for some of these same tax braukts. when many of you look over your taxes and see how much more you are paying for short-term money that you have made in less than a year i know you will be kicking yourselves saying how could i be so stupid? if i had held it for over a year i would be in tax heaven with the super low long-term capital

gains rates. that's a problem. all else equal it's a bad idea to let tax planning have too much control over your portfolio. think about it like this. imagine you owned the biotechs and cloud based stocks that were red hot in 2013. suppose you had owned them for eight months and say you decided these gains are so huge i don't want to pay the tax man the short term rate. if i hold them for three months longer so the hold ing period is over aer year i will be in the clear. my tax bill will be nearly cut in half thanks to the wonders of the long term capital gains rate. in other words suppose you let tax planning drive your decision-making when it comes to the biotechs and established cloud names over the first four months of 2014. these stocks were eviscerated during the spring of oh 2014. the gains evaporated almost overnight. do you see what happened? if you held onto the high flying

biotechs and cloud stocks to get the benefit of oh paying a lowerer long-term cap gains rate in that case let's say you probably lost all your gains. i'm not saying you will give up your gains every time you hold onto a stock for tax reasons. you should never keep holding a stock that could have an iffy future because the stock is so expensive so you can avoid paying the higher short term capital gains rate. not that i have a problem with tax avoidance. it's both legal and terrific. we are not talking about evasion. that's illegal. you own stocks because you believe they are going higher. you don't own them solely in order to futz around with the tax bill when you think there may be problems with the businesses or you are worried they are over valued and you're being greedy as was the case with the beginning of 2014. when it comes to investing i have one simple rule. it's okay to pay taxes. you don't have to like it. but you have to accept it. when you make money the government will take a cut. that's the way it works. you shouldn't let the tax

considerations drive your investment decisions. it's hard enough to do your homework on companies you own. you don't need to add another step to the process. how many more months do i need to hold this thing to oh get the lower 20% capital gains rate though the business might be faltering. no. if you owned a stock for 364 days and sell it there is no harm in waiting a couple of days to cross the one-year threshold and virtually cut your tax bill in half. unless you are on oh the threshold taxes should not be a factor. bottom line here. there is a lot you can do to minimize the damage uncle sam does to you on tax day. take every deduction you can legally get away with but please don't let the difference between the short and long-term caple tall gains rates drive your strategy pt tell yourself what i told myself at my hedge fund. it's okay to pay the tax man. more importantly it's a sin to give up your gains. stick with cramer.

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all right pt we've got to get to tweets you have been sending me @jim cramer. i won't mute or block you. i like these. let's take a tweet. can school back in session? explain stock options so a two-year-old could understand. would appreciate it. thank you. first of all this is not reddit. i can't do it. what i will tell you in kwlt getting back to even" i started to right a chapter to explain options. it started at 25 pages and expanded to 50. by the time i finished it was 110 pages. why? because they are that hard to understand which is why i rarely talk about them on the show. no such thing as easy learning

about options. here's kevin grzy. i just used a copy of oh real money to smash a fly. thanks for the advice and help around the house. i remember reading your text and i smashed a spider with it. whatever's useful. hey, fine. i think it's great. i like fly swatters. you can get them at dollar tree. what's your favorite boyz to men song jim bo? how about "end of the road"? okay. not bad, right? i pulled that one out. @gregory jdy arekes tweets get a 52

disabled vet. don't need a lot of oh money. what's a good percent of retirement account to have in fixed mechanic or bond funds? the rates are so low i recommend the bond market equivalent stocks. if we don't get to 30 or 5% i will stick to it at ten year and three fantastic. then we have bond work with but not until then. we need interest rates. @mike wants to know why the yen strengthens. it's a manipulated stock. a currency. the government manipulates it. who knows what the government is doing there. all i can tell you is that country has not produced a good return in the stock market and everybody thinks it is about to. i remember when it was worth so much more than ours. on charlie rose i said short itten and buy the dow. probably the best call i ever made. i i still don't like japan. i like the country. not the stock market. stick with cramer. ...and takes the wheel right from your very hands...

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help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. why pause the moment? ask your doctor about cialis for daily use. for a free 30-tablet trial go to cialis.com thanks for watching this special show. there is always a bull market somewhere. i promise to try to find it for you right here on "mad money." i'm jim cramer. see you next time.

tonight, hopeful entrepreneurs who believe they have the next big business idea will enter the shark tank seeking the financial backing to make their dreams come true. there. that's called kick butt. this is one of our movements. this is how i keep my adonis figure in shape. you are definitely built like a god-- buddha, to be exact. (laughs) the sharks are ready to invest using their own money, but only for the right person with the right idea. how much do you love money? do you love it as much as i do? probably not. but first, the entrepreneurs must convince a shark to invest the full amount they're asking for... mommy! or they'll walk away with nothing. i'm getting this strange feeling you don't like me. i do like you. i just don't know that i can work with you. (sharks laugh) and if the sharks hear a good idea, they'll fight each other for a piece of it. i was sort of tenderizing you for my offer.