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 to make friends. i'm just trying to save you some money. my job is not just to entertain but to educate and teach you so call me at 1-800-743-cnbc or tweet me @jimcramer. i'm constantly telling you that discipline always trumps conviction i say it over and over again

no matter how much you may love a stock, no matter how enthralled you are with the underlying company, if the rules say sell it, you sell it one thing i have learned in my investing career no matter how much you might believe in something, you violate the rules of the world at your own peril where do these rules come from they are not like the laws of physics where you can't deduce them observing the way the market works the rules come from experience i have spent 40 years in this business and in that time, you better believe i have learned powerful lessons in many cases, i learned them the hard way and because i don't want you to repeat my mistakes, and i do want you to have the benefit of my whole career,

today i want to lay out some important rules for investing. now some of this stuff may seem basic, but you forget the rules at your own peril. i occasionally convinced myself that it was okay to make an exception to ignore my discipline just this once. it seemed compelling at the time and whenever i broke my rules, let's say i got burned it is like that old joke about the guy who goes to the doctor and says, doctor, doctor, it hurts when i shake my hand around and the doctor replies don't do that what should you not be doing let's take down my important rules for investing. number one, bulls make money bears make money and pigs, they get slaughtered

i say this all the time because so often in my career, i have seen moments where stocks went up so much that people were intoxicated with their gains at this point in intoxication, you need to remind yourself not to act like a pig. i heard this phrase on the old desk of the legendary stein doctors. i made a lot of money, maybe too much money, i was being a pig. i had no idea what he was talking about. not long after we got a vicious self off and i gave back everything i gained. i got a barnyard full of sound effects to tell the whole story.

the bull, the bear, the pig, and the guillotine bulls don't have a monopoly on piggishness. we have had major declines over the years, but other than the dot com burst, most stocks did bounce back quickly. at this point, you made a killing if you made long at the lows but if you went low, you got slaughtered. how do you know when you are being a pig? there is no such thing as stupid questions, only stupid answers, but you don't need me to tell you when you were a pig. you don't need an investment adviser, you need a

psychiatrist the financial question is even more stark if you were walking around earning a big amount -- stay in the game the hardest part of investing is holding on through difficult periods. taking short-term pain so you can have long terming gains. the people who got wiped out by the dot com collapse, they never took things off the table. same goes for those who never came back from the financial crisis being cautious and ringing the register near tops ended up keeping you in the game. that is why i remind people every day, have you taken out your profit? have you booked any gains at

all, or are you being a pig? you never know when stocks you own are going to really get crushed. you never know when the market could be enough. you can't have certainty if you assume stocks will be going up forever, in a straight line, you will be in for a world of hurt. sure there will are times when stocks will keep going and going. when i coined the term fang, i love them all. i gave up on amazon on an amazing run. i felt like a pig. but then i felt like a fool when it kept on galloping, and it bugged me. that is the price you pay for following the rules. for every huge pile of cash that gets left on the table, you side

step gigantic losses experience is the term two generations against stock maybe forever. never forget bulls make money, bears make money and pigs get slaughtered. and i will keep on repeating it forever with the sound effects because it is just that important. rule number 2, it is okay to pay taxes. look, no one has ever liked paying taxes but like death, taxes are inevitable and unavoidable. the aversion to paying taxes on stock market winnings border on the pathological wall street is littered with broken hearts of investors who made this kind of mistake. a couple of years ago i went to a presentation who recommended buying the stock of macy's

it was ripe for some profit taking but i know people who had owned it for years with hefty profits and they didn't want to ring the register they would have had to write a check to uncle samg. next thing you know, the stock was obliterated. the mall had hit a tipping point and the darn thing got crushed those who didn't want to share profit with uncle sam ended up with no profit at all. make your piece with the tax man. some gains unsustainable and need to be taken a profit on paper is not the same thing as a profit in your bank account gains can be ephemeral and the last thing you need is to be worries about capital gain taxes. when it is time to sell, you sell stop fearing the tax man, start fearing the loss man you won't regret it.

take some profits. bulls make money, bears make money, but pigs and don't be greedy, and a variation of that theme, okay to pay the taxes, don't be worried about taking a taxable profit because you may end up with no profit at all chris in ohio, chris >> caller: hi, thanks so much for having me. >> good to have me. >> caller: so my question is, we have about $1,000 of disposable income and neither of us have a 401(k) match with our jobs we have a mortgage and trying to figure out what would be the best thing to do with that $1,000 >> that is what an index fund is for. you can take 10% of that and use it for mad money

buy a share of something my first stock trade were one share, five shares you need an index fund to get started to build up wealth and then you can do it how about giaco moin new york. >> caller: stay away from riskier assets until they have $10,000 allocated. seeing all of this crazy bull market that we got going on, seeing the market ramped up, if you don't have $10,000 invested in mutual funds, what should i be doing sit around and let opportunities pass >> a young person, look, i want people to be able to save. that is my principal goal. if you want to put some mad money aside and do what i think

is basically doing some gambling with it, i am not going to stop you. but if you are saving that way with risk, as long as you understand the risk, i am okay with it. jeff in california, jeff >> caller: this is jeff in lake tahoe, thanks to you and your staff for your informative and helpful program. a two part question pertaining to interest rates and specifically yield curves. can you explain to us home gamers what a flattening yield curve mean and why did analysis say when it is inverted yield curve that there is a recession coming and the last part is what happens if the ten-year t bill goes over to 3%, how does that affect the stock market in 2018.

and grab your skis and come out and see us here in tahoe. >> you are very kind i used to play cards in nevada side rest of the curves going down, and that is a curve that has shown in many cases to lead to recession, but other cases not so i am not hard and fast in that rule. i do think as rates go up, business does slow and that is undeniable and we are such a low rate and business is so strong, that we can afford it. mike in california. >> caller: good afternoon mr. cramer >> mike. >> caller: two things. one, first, thanks for taking my call and thanks for leading us 9:00-5:00ers

my question is concerning dividends, do you take the money and put it in your pocket or put it back in the stocks. and if you do, how do you make that work? >> you have to do dividend reinvest it is a check off basically. my travel trust you are not supposed to. please reinvest. and take that money. because there is nothing like the compounding of a great compounding that you get particularly with stocks that have good dividends. remember my first two rules. bulls make money bears make money and pigs get slaughtered please don't be greedy and don't be afraid to pay the tax man on profit you earn. it is a lot better than riding things to losses take some off the table. more "mad money" ahead putting four decades of experience to work tonight counting down the most important rules for investing to help you

navigate the market. stick 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.

♪ at&t gives you more for your thing. your snapping pics all day, all night thing. your gettting the low-light, just right thing. ♪

introducing the samsung galaxy s9 with low light camera. now 50% off. more for your thing. that's our thing.

news flash at the end of the day we are only human if you remember only one thing about being an investor, that is it no one is perfect and it is inevitable that we are going to make mistakes. the nature of the businesses and the nature of humans you need to follow a set of rules. rules that are designed to protect you from yourself. my next commandment, never buy a stock all at once. i can't stress that enough no broker likes to fool around

with partial orders. the game is to get the trade on at one level in a big way. get the position in the sheets or in the portfolio. but from where i stand it is all wrong. i want you to stage your buys. stage yourself the term we use on wall street is work your orders. try to get the best price over time and not necessarily in one day. maybe multiple days. when i first started out as a professional money manager, i wanted to prove how special i was. i was so sure i was rights put me on 50,000 cad i would scream as if i was the smartest guy in the universe. when i think about that young

cramer with mostly a full head of hair, all i can say is i was one arrogant son of a gun. i was arrogant and i was wrong if you want to buy 50,000 shares of caterpillar, you don't pick them all at once instead i should be buying in increments of 5,000 shares you buy it gradually over time trying to get the price you could. you can put it on a small position and cross your fingers. i know we treade institutionall. and i know longer trade in size, but i still invest and i invest in my travel trust, you can follow on an

it is crazy when i say it, no one has that kind of insight so why don't more people do it my way why don't people buy in 100 share increments i think because they want to be big too. it is pla that is why you need to resist feeling like you are making a statement when you are purchasing a stock i have bought and sold billions of shares of stock and you know how often i got in at the absolute bottom? maybe one trade in 100 and i am pretty good at this game

resist thearrogance. buy slowly humility beats in the real world, you can return merchandise and get your money back wall street is different if you buy a stock, you have to eat the losses that is why you need to be careful to distinguish broken stocks and broken companies which deserve to see their stocks trade lower without you sometimes damaged companies can be easier to discern

one of their pharmacies. it wasn't a good sale to rush toward the ongoing problems that the company meant that the stock was toxic. on the other hand, it could be because of efficie because of etfs, just because the stock is down doesn't mean it has to do with the actual business how do we distinguish. i develop a list of stocks i like very much i call this my bullpen when wall street throws a sale with the whole market coming down, i use that as an opportunity to pick up the stocks coming down that was designed in a cooler moment, cooler head.

you never buy a position all at once because what you think is merely a damaged stock, might be a damaged company. if you take your time, you are less likely to end up with a large quantity of broken merchandise. stick with cramer.

if you want to build a portfolio of individual stocks, a big if since there is nothing wrong with getting all of your equity exposure that mirrors s&p 500, you have to be vigorous the next rule, is do you the homework my kids sometimes hated doing their homework what is the relevance of most

things they teach in high school and how will it help you later in life? why even bother. as a parent, i always encouraged my kids to study you suspect it might be just as irrelevant to your portfolio that schoolwork seemed to be to my kids. if they are going to own these stocks, they don't want to hear it they think i am being a skull. they just want to own them when i remind people that doing the homework is listening to conference calls they look at me like i am an old fashion teacher, schoolmarm. that is wrong.

owning stock without doing a proper research, i regard it as plain lunacy but people do it and they do it for a couple of reasons. on the one hand, it is the buy and hold stock the idea that you don't need to know what is happening with the company because you are in it for the long haul. for those of you that don't have time, i have the solution, get someone else to manage your money or do the smart thing and invest if a low cost s&p 500 index fund it is the buy and hold premise that is more pernicious. you know what, i am just going to hold on to that cmgi, you have to look that one up, it has got to go up to 100 where i brought it i could substitute vertical net,

100 companies that i could put in that sentence of course this philosophy took a real blow during the financial crisis when so many people practiced buy and hold got wiped out. what is the homework before you buy a stock, you should listen to the conference calls, you have to that is the minimum. you can go to the company's website, read the research, read news stories, google the darn thing. everything is available in the web. you aren't up there begging at the goldman sachs library for microfiche statements three months ago if you fall back on the buy and hold strategy for any groups of stocks and don't pay attention, i can assure you that you will be soundly beaten by professional managers who have good track records

i am quite certain that any index fund can beat someone who doesn't do their homework. the next rule is diversify, diversify and then diversify some more. controlling the down side means managing risk. what is the biggest risk out there? sector risk. stocks in the same sector, they tend to trade together especially at extreme moments. do you know at about 50% of the action, the given stock comes down to sector in some areas because of etfs, it is higher if you had all your eggs in one group you just got scrambled and there is only one thing you can keep you from getting nailed by this sector risk and that is diversefication. that is why we play this game am

i diversified. it is the only investment concept that works for everyone. if you mix up enough different sectors in your portfolio, you won't be wiped out if one group gets ob brliterated. if it is such a no-brainer, if every adviser has been telling everyone for years, how is it that someone can be undiversified? it is because a lot of people can't tell you what they own i still field quite a few stocks from people who think earning fang is a diversified strategy hardly that is what i call faux diversification. i can't count on this

portfolio -- i have said no to portfolio, j and j, eli lillys and bristol myers. they leave you way too exposed to risk. having an undiversified portfolio is not just that is the nature of the beast. a hedge fund manager who does that and gets lucky can market himself as a huge success. get profiled from every magazine here is the bottom line. whether you are an amateur or professional, you need to do your homework and keep your portfolio diversified. this is the routine textbook

stuff that keeps you from monster losses down the line mike in south carolina >> caller: hey, jim, i was wondering from a new investor, say investing $100,000, how much stock should be in my portfolio? >> after ten, you are kind of a mutual fund. now if you are a real stock junkie, like i am, you can take on more, but ten is the maximum that people can do don't do more than that because you won't be able to do the homework roberto from texas. >> caller: i just had a question about, because i am a new investor i am 29. and i have a small amount. $1,500 and i am wondering how i should invest it. in index fund?

>> s&p 500 index fund. then start doing mad money index funds keep you diversified. and we like to diversify, diversify. homework isn't money, but losing money is worse homework and diversification are key. stick with cramer. need a change of scenery? the kayak explore tool shows you the places you can fly on your budget. so you can be confident you're getting the most bang for your buck. alo-ha. kayak. search one and done.

look, i don't want to go zen in the art of portfolio maintenance on you, but when it comes to managing your own money, you are your own worst energy what do i mean by that if i want to invest wisely, you need to be fighting off your own worst impulses we have emotions and they can throw you off your game. you obey the rules so you do the smart thing even when your emotions are telling you to do the opposite which brings to my next rule

panic is not a strategy. a stock gets hammered and then investors sell after the hammering. the market gets crush and people bail at the end of the day people can't take the pain so they bolt. panic is the operating instinct in all of these cases. something basic and instinctive about panicking. if you are a stone age hunter gatherer, who accidentally stumbled into a family of gristly bears, panic is a good thing. there will almost always be a better time to sell than in a panic. and don't i know it. back in 2010 i was on the air for the flash crash.

i watched the monitor for the ticker, the crawl under the picture and i couldn't believe what was happening people were dumping stock because everybody was. and they didn't know why they were dumping it. i urge people to buy a stock you love the result, to this day, people come up to me and thank me for their advice realizing no one ever made a dime from panicking, and help you profit from it i did it back in 2015. i told people to buy down but only using limited orders which i recommended for travel plus. so the next time there is a big market wide selloff and you feel like fleeing, i want you to do something for me

i want you to take the opposite side of your emotions, the opposite side of the trade and when you see one of those high speed routes of a sector, why not buy a little get a feel for it. see what i mean, the most rewarding trades you can make is where the decks have been cleared out by terrified folks using market orders. who don't get the exit doors are not as big as they think they are. mind you, i am not saying, buy every stock. they are not all worth buying. i am saying it is a rare moment where you won't get some sort of bounce after a big decline the next time you want to dump everything, take a deep breath and wait for the rebound before you sell speaking of hideous down days, i have another rule. when the stock market gets

unrelentlessly negative, remember who you defends everything, defends nothing. the point stands so he who defends everything, defends nothing, it is about how you evaluate your holdings when the market flies you don't need to worry about most of your positions. when things get more difficult, when you are on the defensive, you need to realize that stocks that you bought at a better time, fit the market if you try to defend all of your positions in a market that turns against you, that is a recipe for you to get blown out of the stock market and when i say defend, i mean you can't treat a declining market like it is a buying opportunity. if you know that, you will quickly run out of capital

yet when the market gets negative, you need to get more selective and focus your efforts. that is why i rangle my stock all the time ones are stocks that i buy right now, threes are stocks that i sell i make this plan not in the heat of battle. and then i know which ones to cut or use the sources of capital to buy the ones. let's say tech is getting hammered but you think it is going to rebound pick the best tech stocks you want to buy in a weakness. that is right, the nonessentials. the ones that have no catalyst and you only own karen cramer worked for me for

years at my old hedge fund used to be called circling the wagons the first time you do it, you will curse yourself. but after you experience a number of rough markets, you will realize how valuable your profit is. over time you end up with great stock basis. great investors know how to ignore the emotions. when they get in the way of making money nobody made a dime by panicking. and don't double down with your eyes closed. you need to focus your capital on your absolute favorites rather than chasing bargains in lower quality merchandise when it turns out they weren't bargains at all. rich in new york >> caller: hi, mr. cramer, it is a pleasure could you please explain -- i'm

good, thank you. please explain the technique in buying calls and should they be used by us home gamers, to boost or pad our portfolios >> it is a great question, and the najarian brothers. it could be a low -- how to use calls to limit your downside and get maximize upside exposure getting back to even david in california. >> caller: booyah. thanks for having me. >> glad you called. >> caller: quick question. for millennials, where should they invest their money other than fang? >> there is a lot of different

fang like names and different industries i like aerospace maybe get something in that group. i like foreign exposure. and that is not such a bad idea. maybe an etf that has europe and i think you know what, if you are really young, why not look at riskier biotech stocks you have your whole life to make that money back. emotions get in the way of making money next time the market gets slammed, don't panic you need to do your homework don't chase and don't buy damaged merchandise just damaged stocks "mad money" back after the break.

- i love my grandma. - anncr: as you grow older, your brain naturally begins to change which may cause trouble with recall. - learning from him is great... when i can keep up! - anncr: thankfully, prevagen helps your brain and improves memory. - dad's got all the answers. - anncr: prevagen is now the number-one-selling brain health supplement in drug stores nationwide. - she outsmarts me every single time. - checkmate! you wanna play again? - anncr: prevagen. healthier brain. better life. your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™ liberty mutual insurance.

you know you don't get to be a hall of fame player without taking a few shots. even though i have been out of the game for a while. i learned to turn to blue-emu. blue-emu's, non-greasy, deep penetrating formula gets down deep for big time comfort. and more important it doesn't leave me smelling bad. well at least no funnier than you already smell, right coach? c'mon man, give me ten! blue-emu it works fast and you won't stink! [ counting pushups ] 1, 2, 3 ... welcome back to tonight's check yourself before you wreck yourself edition of "mad money." i'm a big believer in the idea that once you get money saved up, you are in control of your financial destiny. and that means you need to be careful. because you are the one with the

most power to derail your financial future you can't real them out and you can't outlaw them. i want to make sure you don't make the same mistake twice or three times. that is why i have rules to protect you from the misjudgments that i made don't own too many stocks. at my old hedge fund, i would spend three hours every day analyzing the mistakes of the day before that was my major task one that i complete every morning before anyone came to the office generally before 3:00 a.m. and 4:00 a.m i would analyze every losing trade. i tried to figure out how i could have made more money or more importantly lost less money. i was for lack of a better word

maniacal about it. and then i had an epiphany when we own fewer stocks we tended to make more money. that's why ever since, i won't by a stock without first taking a bigger one off the table and i try to do that with my travel trust you need to limit your holdings. that is a great discipline and one you should adopt pronto. all of the bad money managers i know of, have hundreds of positions. they can't keep track of those all of the real good money managers have a few names they know inside and out. which means they can buy confidently on the way down when the market goes awry now i know it could be constraining you end up selling stocks that

aren't as good for stocks that are. that is how to make a portfolio work for you that is portfolio management when i made the most money, my sheets were one sheet of paper double space please remember, whether you are a pro or an amateur, it is almost always possible that you have too many positions. rule of thumb, if you are just investing for yourself and you own more than ten positions, ten stocks, maybe you ought to pair back a bit you can't have too many stocks, but it is hard to have too much of cash. which brings me to my next rule.

cash is for winners. cash is such a perfect investor that is drives me crazy how few people recommend it. they hate the market so they are only 95% long. as an investors that is the wrong way to approach things you don't like the market, you don't like any sector, then sell stock and raise cash don't by put options the odds do not favor on you winning on both stocks if you can raise cash and put it to work at lower levels, that is the best way to protect yourself against lousy markets. i was one of the biggest option traders on wall street when did i make money? when i bought put options to profit from low quality

companies that were going to have i thought shortfalls or stocks that seemed hopelessly overvalued versus the fundamentals just sell some stocks and go into some cash which is literally short-term treasuries. people talk about how little stock earns, or they say can't be in cash, that's for losers. no cash is for winners. especially if you think there is a major disaster ahead i grew up in a different time. i shorted when i had an edge i can't short at all by contrast when i could, i didn't -- i care about not losing money so if you don't like the market, if you think there is nothing compelling to buy into any weakness, i suggest you sell stock and raise cash

sit on the sidelines, there is nothing wrong with that. never the wrong call when you don't like the tape or can't find anything that truly makes sense to you always be careful to not own too many stocks and not to have too little cash. stick with cramer.

the tweets are piling up let's start with one from quinton who asked at what age should i put bonds in my

requirement account? currently stocks and mutual funds are 25 years ago i like to actually extend it a little and say not until you are in your late 50s to i want to start seeing a lot of bonds. why? people live longer than they used to and bonds don't generate enough return. how about higher yields and dividends stocks moving on, i would like to see from you a show title typical errors of emotional investing. that is a great idea and i am going to do it i know that over and over again emotional investing produces major mistakes that lead to big losses you have to check them at the door and i will do it for you. these tweet from steve danielles. he says @jimcramer, booyah

vanguard, that one is one of my absolute favorites stick with cramer. hi! i'm mike ditka.

you know you don't get to be a hall of fame player without taking a few shots. even though i have been out of the game for a while. i learned to turn to blue-emu. blue-emu's, non-greasy, deep penetrating formula gets down deep for big time comfort. and more important it doesn't leave me smelling bad. well at least no funnier than you already smell, right coach? c'mon man, give me ten! blue-emu it works fast and you won't stink!

[ counting pushups ] 1, 2, 3 ... >> i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money. i'm jim cramer, and i will see

next time! >> welcome to the shark tank, where entrepreneurs seeking an investment will face these sharks. if they hear a great idea, they'll invest their own money or fight each other for a deal. this is "shark tank." ♪ with a new twist to a conventional product. hello, sharks. my name is dave mayer, and my company is clean bottle. i'm here today seeking $60,000 in exchange for 5% of the company.