above 120. >> pete? >> i don't think peter, paul and mary like peter, paul and mary this is insulting. it's making my ears bleed. this is worse than the toni braxton. >> i thought it was a cartoon, but apparently it had deeper meaning. >> us. thank you so much for watching see you back here tomorrow at 5:00 for more "fast. "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. i would to cramerica other people want to make friends. i'm just trying to make you some money. my job is not just to entertain, but to teach and educate you so call me at 1-800-743-cnbc, or tweet me @jimcramer. tonight i want to share some of my accumulated wisdom. believe me, i've been doing this thing for a long time, because there are so many different

things you need to balance in order to be a great investor that kit be hard to keep track of everything that you need to do and a lot of this stuff is much more important than the day to day action in any particular session. without the right discipline, the right framework, the right dare i say philosophy? well, you're going to get yourself into trouble. but i also know the big picture financial advice can be hard to process. a lot of it seems downright contradictory to most people >> sell, sell, sell. >> buy, buy, buy >> wetell you to have conviction, for instance, to stick with the companies you believe in then we say you need to be able to change your mind on a dime when the facts change. you need to be cautious because it's so dangerous out there. but you also need to be ready to pounce on opportunities when they present themselves. >> buy, buy, buy >> you need to be skeptical, but you also need to know when to suspend your belief, your disbelief. you need to avoid chasing stocks that have run too much, but you also shouldn't care too much where a stock is coming from if you believe it's headed higher you know the rules it doesn't matter where a stock

has come from, it's where it's headed to. believe me, i get it i get it if you take all my rules literally, you're going to be running around in circles while tearing your hair out. how do you think i went bald tonight we're going to take a step back and put this in perspective. if you pick your own stocks, the thing you really need above all else is good judgment. but obviously good investing judgment is not the kind of thing anyone can teach you in an hour of television or even a year of television for that matter that's why try to help you build good habits. try to teach you better ways to think about individual stocks and the whole market try to give you the tools you need to develop your own judgment all my best professors in college focused on teaching us how to think, howto think, not teaching us what to think. i've always tried to take my cue from them. i want to teach you how to be a better investor, not just tell you the stocks i think are good investments. the problem is that's a heck of a lot to process so let's try to put it all in context. first and foremost, when you're

managing your own money, before any other consideration, you need to know yourself. i said this before i'll keep saying because it's so important. you simply can't know which stocks you should buy if you haven't taken the time to really consider what your own personal objectives are and i can't decide them for you. you need to build up your wealth ultimately to make a life altering purchase like a home. are you just trying to get a decent return as you save for retirement do you have money to burn that you're willing to take risk on more speculative propositions? those are all different mind sets the truth is there is no one size fits all approach to invest, and anyone who tells you differently is either dangerously misinformed or flat-out lying to you. [ booing ] probably in order to sell you something. [ buzzer ] but far too often people invest in the stock market with the simple poorly defined goal of making some money. yeah, all we want to do, want to make money everybody wants to make money. but how quickly do you want that return what are you willing to risk to

get there? how much can you even afford to risk in the first place? these are really important questions that you need to ask yourself before you start trying to pick any given stock. why? because without a clearly defined goal you have no way to determine which stocks you should be buying in other words, your 401(k), your ira or broj account do not exist in a vacuum. if you're trying to save for retirement netflix might not be the place to put for capital if you have a decent sized nest egg and you want some capital appreciation, then netflix and the rest of its fast-growing fang cohorts -- facebook, amazon, google, now alphabet, they all seem -- they start to look a lot more attractive given that mind-set. in short, before you can start making judgments about individual stocks, you need to figure out what your own internal yard is going to look like that's the foundation of good investing, knowing what you need so you can find stocks that are suitable to your particular needs. let me put it another way.

if you want to fly across the pacific ocean, you do it in an airplane, a boeing 747 you don't try to fly across the pacific in a ford fiesta if you want to pick up your kids from school, taxiing down main street in a 747 would be really impractical. in that situation you'd be much better with that ford fiesta how filibuster you're renovatin your howse house so you need to go to home depot for a metric ton of lumber and tiles and paint and maybe power tools to get the job done the ford sfafiesta is probably o small. ah, but a pickup truck would be perfect. this may sound simple, even downright obvious. you want low risk holdings that will give you a slow and steady return for those of you you've who don't have time to research individual stocks, you can't really go long with a basic low cost s&p 500 index fund -- ♪ hallelujah -- that pries to mimic the broader market

i'm going to keep doing it because they are phenomenal. at their best, they help democratize the incredible engine of wealth creation that is the u.s. stock market america's a growing country. it's very business friendly compared to the rest of the world, particularly the developed world. when you buy an s&p 500 index fund you're betting on the long-term performance of the u.s. economy you know what you're betting on? you're betting on progress historically, that's been a very good bet that's why i say you need to invest your first $10,000 in an index fund don't bother to try to pick individual stocks until you have more money than that first $10,000, index fund. if you're looking to make slow and steady money over a period of decades, that's retirement investment in a nutshell you might consider certain kinds of individual stocks, with big dividends because of compounding. a 4% dividend yield may not sound all that spectacular, but even the underlying stock goes nowhere, it will dpoubl your money in 18 years thanks to the

magic of compounding of course not every investor is simply trying to fund their retirement and even if you are, that may not be the only thing you want to do with your savings. this is another important point. you can have multiple objectives you can and should have multiple pools of money i like to break things up into your retirement portfolio where you need to be cautious and your discretionary mad money portfolio, the extra money you're not going to need in order to support yourself after late stage capitalism has ground you down and you're no longer able to work that discretionary portfolio were you can afford to take more risks in order to generate faster profits make sense but mighty big butt here, for the vast majority of people it's going to be much less important than your retirement portfolio because it's not just retirement if you want to pay for a house, you want to send your kids to college you should take a more conservative approach to managing that money. whatever kind of account you put it in, your strategy for college tuition savings or future house savings should look more like

your retirement portfolio than that mad money portfolio so please, get to know yourself before you jump down the rabbit hole of getting to know individual companies bottom line. trust me, i get it when you get excited about a particular stock, you often want the dive right in. i've been there before first, though, you need to consider what you're trying to get out of the market. the answer to that question is not going to be the same for everyone, but everything else stems from it. you can't make judgments about stocks until you know what characteristics you actually value. let's go to paul in texas. paul >> caller: boo-yah, jim. >> boo-yah, paul >> caller: i've noticed companies, a lot of them will exceed on one and miss on the other in reference to revenue and earnings per share so as a shareholder in the companies i'm looking for, if they're going to exceed one and miss one, would it be more important for them to exceed on revenue or would it be more important for them to exceed on earnings per share >> holy cow, what a great question you know what? because i've actually done a huge amount of research on this.

and thank you, paul, for asking. it's revenue growth. we want to see pure revenue growth that means that there is demand for the product. the actual earnings per share may be in some case manufactured, literally by tax rate, by buying stock back but you can't rejigger sales okay know thyself always consider what you're trying get out of the market before you dive into a stock on "mad money" today, yoga won't help you with the type of flexibility i'm talking about. and then feeling verklempt about your stock picks i'll tell you why it's time to snap out of it and how the late great nimaa angelou offered some of the best investing advice i've ever heard. so stick with cramer 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.

regular viewers know i've got a lot of rules, the result of more than 30 years in the money management business. first as a broker then a huge fund manager and then as journalist and commentator i've got rules for trading, what to do in a rally or sell-off, for picking winners, for avoiding losers. it can be a lot to take in but as i mentioned before, the point of all these rules is to help you learn from my mistakes and develop your own judgment. i just explained why you need to have a clear understanding of your own objectives before you start buying stocks, something more focused than merely trying to make some money so let's pretend you've already done some self-reflection and you know what you're trying to accomplish now you can start buying individual stocks, enough to fill out a diverse portfolio, five to ten names. right? hold up. before you buy anything, i need you to do one more thing first, you have to do the

homework now i've covered this before i'm going give you a quick version right now. if you're going to invest enough money in a company for it to matter to your portfolio, you need to know what the heck the company does you need to know how it makes its money, and how much money it makes. the internet has made this whole process much easier. certainly when i first started this show, holy cow, this is now a delight. you can go online, read the sec filings which contain a wealth of information you listen or read the transegypt scripts of the conference calls which i regard as the best way to get familiar with the business and the key metrics which will drive its stock. feel free to read journalism, listen to opinions, immerse yourself with the company and the way the stock trades of course i've written a half dozen books just about this topic, okay, about how to do the homework but the actual research is just part of doing the homework after you've learned what you can and developed a thesis, a theory about why you think the stock is set higher, there is one final step you have to explain that theory to another living, breathing human being. it doesn't have to be a professional

you can talk to your mom, your kids, a friend the important thing here is that you put your thesis into words, that you can basically comprehend it yourself lay out why you want to buy this thing and why you think it's headed higher. if there are major holes in your theory or you're relying on wishful thinking, usually a reasonable adult or mature teenager will be able to catch that once you've done that, though, then you are ready to pull the trigger [ gunshot for those who are tuning me out because you can't stand to hear another word about homework, i'm done that's it! that's all i'll say about that process preparing to buy a stock, because tonight i'm trying to focus on the bigger picture. so let's fast forward little once you've done the homework, you can build a diversified portfolio of five to ten individual stocks. any more than ten and you likely won't have time to keep up with them all the idea is you should be able to do this in your spare time. not that you'll turn money management into a second or third job. how can have i so many stocks

for actionalerts.com because i've got two research assistants you're doing it yourself let's assume you own shares in a bunch of companies that you genuinely believe in you now have a thesis for each one. there is no sector overlap meaning you have five to ten companies in distinct industries that don't tend to trade together diversification, like we play on the show in short you have what in theory is an ideal portfolio. what's the most important thing for you to keep in mind? above and beyond everything else, you need to know that your perfect portfolio won't stay perfect for long the five to ten stocks you thought were winners, yeah, unless you're absurdly lucky, not all will stay winners. some will be losers. some will do nothing and some of the companies you've liked best will inevitably disappoint you [ crying ] what can i say in the game is full of heartbreak which brings me to my next meta rule always, please, please try to stay flexible. you have to be flexible because business by its very nature is dynamic, not static. things do change

markets change new competitors will enter in the industry and undercut existing players on price to take market share. previously well run companies will start executing poorly, and we've seen that time and again customers cancel orders. unforeseen events happen that hurt business or simply makes some category of stock seem less attractive to the big institutional money managers who dominate the market. when something like this occurs, when the story of a company you own shares in changes, you got to be willing to acknowledge things are different the reason you gave for buying a stock is no longer valid, then you should sale. this is why you need to explain your picks to another person so, you can recognize when your original idea has stopped being workable that may sound straight forward, but for decades so-called experts have peddled the idea that when you buy a stock, you need to be prepared to hold on to it until the -- until the death of the universe. how many times have you heard someone say buy and hold, buy and hold well, i got to tell you, that's nonsense don't get me wrong

i would love to buy a stock and hold it from here to eternity, because the story pans out and the darn thing keeps going higher but if the story doesn't pan out, or after a long time, there are big changes in the industry, well, you got to be willing to sell >> sell, sell, sell! >> at least sell some. that's why i always tell you it's buy and homework, not buy and hold i wish a lot of the gray beards would adopt buy and homework we'd save a lot of money bring this up because people hate, hate, hate admit when they made a mistake of course they hate selling anything because they're worried about tax. once they make up their mind we don't want the facts to get in the way of a good story, right but you know what? you can't afford to fall in love with a stock when you buy shares in publicly traded company, you're not joining that stock in holy matrimony. you don't swear to stick with it in sickness and health, for rich arer or poorer you don't need to go to a judge to get a divorce it's just a piece of paper so acknowledge when something's changed. if you buy a stock because you believe the underlying company is going to take a ton of market

share and then it fails to do so, well, don't move the goalpost on yourself don't search for new reasons to hang on. just get out of there. you must be willing to recognize that companies can take a turn for the worst. managements make mistakes. ceos made bad strategic and tactical errors every day. let's pick one let's pick bed, bath & beyond. it literally spent $5.4 billion buying its own stock back from 2013 to 2017, through 2017 in an attempt to boost terns per share by shrinking the denominator so to speak and taking the stock price up but it didn't really work. the company kept losing market share to online competitors like amazon and the buyback accomplished next to nothing by the summer of '18 they had less than $2.7 billion they spent twice that amount on the buyback. if they 138 put that money in a mattress, the money would now be worth twice as much. you know what their mistake was? the guys running bed, bath & beyond, they weren't flexible.

they kept buying back their own stock in the mistaken belief it would help don't make the sake error. when something with the company you own, be ready to stop hoping and start selling. being unwilling to recognize a term for the worst always seems to lead to much larger losses than you've already accrued. the bottom line, let's bring it all together before you buy a stock, do some homework and come up with a thesis, reason why you think that stock is headed higher. once you own it, please stay flexible if your thesis doesn't play out the way you expected it to, sell the darn stock don't keep bashing your head against the wall recognize that things don't always go your way, and then -- >> sell, sell, sell! >> move on liam in massachusetts, liam? >> caller: boo-yah, jim. >> boo-yah, liam >> caller: hey, i just had a quick question about index funds. >> sure. >> caller: you say with certain stocks buy them at certain times like monthly or quarterly or when at a good price does that apply to index funds

because you say to purchase $10,000 -- >> yes, but what i'm really trying to do is to make it so that you don't necessarily come in all at once a lot of people put the money to work i actually like to space things out, maybe try to -- when you get a real downturn, if you put all your money in, you can't take advantage of it that's why i like to be flexible mike in texas, mike? >> caller: yeah, hi, jim thanks for taking my call. >> of course. >> caller: jim, i'd like to own some individual names in the tech space. >> okay. >> caller: but i'm finding that the prices of these stocks are just too expensive so i've started looking at some etfs and some mutual funds as an affordable way to gain some exposure to these names, and i'd really like to hear what your thoughts are on the matter what do you think? >> one of the things i don't like about the mutual fund industries they don't have to tell you what they really own. they may be buying the same stocks you think are too pricey. an etf is homogenizing the same

day. you have to decide that the market is too rich or that group is too rich and therefore not to buy, or, of course, you just say, you know what i'm going to take a long-term view and i'm not going to game it and maybe don't buy all at once, but space out your buys. matthew in arizona, matthew? >> hey, jim. this is matt how is it going? >> i am doing well how about you? >> caller: i am good, couldn't be better. hey, i got a thing for you it is a good idea to invest in the government if so, should it be a short-term investment or a long-term investment >> well, look, cash is short-term investments longer term, you may want to be able to take advantage of higher rates and get in there and use the power of compounding i think the conservative investor who is old shore be thinking about treasuries. some young person, and you do sound young, they don't fit. you need to take on more risk, not less you've got your whole life to make up the money if you do lose it before you own a stock, come up with a thesis on why you think it's headed higher and once you own it, please stay flexible much more "mad money" ahead.

there is not crying in it. there is not crying in investoring. i'm telling you why it's time to take emotion out of it when it comes time to picking stocks and then how the acclaimed poet maya angelou gave me some of the best investing advice i've heard i they have is a bull market every night. tonight i'm telling you where to find it. stick with cramer.

tonight we're zooming out and talking about the big picture. the stuff you absolutely have to do if you want to manage your own money in the stock market. before i get back into it, let me just say that if you don't feel like reflecting on what you need from the stock market, if you don't want to do the homework, if you don't want to watch the underlying companies and give up on their stocks when something goes wrong, nobody is forcing you to do that there is no gun to your head

it's okay if stock picking is not for you. and that's why vanguard invented index funds. it's why the dutch invented bonds for heaven's sake. plenty other investment option if you're going to play the stock market, and i use the word "play" pretty loosely if you're going invest in it, you should put in the effort to do it right, don't you think?" i think stocks are the greatest engine of wealth in history. you can harness that engine, make it work for grourks you know what you're doing the stuff i've been talking about all night, but there is another altering component here. call it the emotional side of the equation you need the right attitude toward the market, because without the right attitude, stocks will break you. i mean it. this is a brutal game and you need to make sure you have got the right head space if you're going the play it. i cannot stress this enough. for many of you, managing your emotions will be the hardest part investing harder than picking winners. harding that i'd fight new trends harder than knowing when to cut your losses.

why? because the market is a harsh mistress at times it can feel like an abusive relationship, but we just keep coming back because long-term it is a great way to try to make money. the thing, unless you can perfectly predict the future, you're going to make lots and lots of mistakes it's inevitable. [ buzzer ] and when you -- when mistakes lose you money, that can be very tough to handle. you need the patience, the patience of the dalai lama to not get upset when you buy a stock and it falls off a cliff imagine what it was like for me at my old hedge fund before i mellowed out i was the opposite of the dalai lama when i got something wrong, i would flip out you did not want to be around me on a down day, especially if i was way too long so i can tell you from experience that this is not a productive attitude. you know what? if you did read confessions of a street addict, you know the attitude i know better than anybody that

you need to try to remain calm because a constantly getting mad at yourself just is not sustainable. you'll beat yourself up. it's crazy you'll end up rung out of patience and giving up on the whole asset class. look, i'm not telling you to be the dalai lamb map you don't need to be a buddhist monk to be a good investor it's okay to get mad or sad when the market punishes you with its behavior i still do action alert stocks, the stock that my charitable trust owns, if it gets really hit, i feel awful, i do. i can't get it out of my but you know what? i have to. you can't afford to punish yourself the market is brutal enough on its own. in other words, get your head on straight your head matters in this game you need to have it on right every day if you're going to spot opportunities yet so many of us approach the market of let's say an inferior attitude and infear yard state of mind. our heads are clouded by thoughts that throw us off target, make us do the wrong thing. you will be in the wrong frame

of mind to select the next opportunity. let me be your stock market therapist for a moment there are a lot of harmful recurring thoughts that you can have that will mess with your judgment but the worst of the worst, when you think to yourself if only, if only i had acted sooner on electronic arts, or if only i pulled the trigger on nvidia, or if only i stayed short chesapeake energy, coy have made a fortune. don't get hung up on the would have, should have, could haves this is wasted, damaging emotion we're talking about. it's destructive to the positive psychology you need when you're making investment decisions. for a long time, i took it to an extreme. i would sit and be mesmerized by big misses i would be obsessed going over the big miss over and over and over again i can put it out of my head for action alert news in a couple of hours. i'm talking about days on end. not anymore. i don't do that. it took me a long time to learn, but eventually i was able to see just how destructive playing the would have, could have, should

have game can be if you're an emotional guy like me you may need to trick yourself into a more productive pattern of thought i've had to build in all sorts of methods of tricking my mind into not playing this game, chiefly removing the stock from my desktop and my mobile stock list just going in on my skin and taking it right off. you look at it every day when you scroll down you see it, it brings up that bad thought get rid of it. just clear it out. if you like so it much after you sold it, go buy it back for heaven's sake. but don't tell me what you should have done or should have done you didn't whether you walked into a big loss or missed out on a big gain, it's irrelevant. stop beating yourself up, for heaven's sake. bottom line, the stock market can be punishing enough. you don't need to make things harder by punishing yourself don't play the if only game. if you need help curbing this kind of destructive thinking go, to that extreme. take the stocks off your monitor or your portfolio watch. off your cell phone.

you'll be surprised how much better your decision making becomes when you stop the would have, could have, should haves devon in florida, devon? >> caller: hey, jim, how's it going? >> real good how about you, devon >> caller: good, good. >> what you got? >> caller: all right so i'm 25 years old and maxing out a roth ira, and i know you've always suggested investing in low cost index funds. >> right. >> caller: my question is should i be 100% of my portfolio in an s&p 500 or should i be using multiple index funds to build a diversify portfolio? >> i actually think what you ought to do is think of it like this put the preponderance in an s&p 500, and then after that pick one or two i don't want you to be in mutual fund and mutual fund that makes it even harder. basic bedrock s&p and a couple of others, maybe you like health care, maybe tech that would be my choices mike until california, michael >> hey, jim, thank you for

taking my call >> of course >> caller: i have a question about 401(k) plans my company -- when it comes to types of things. i just wanted to know what percentage of my paycheck would be a good starting amount to contribute >> whatever the maximum you're left, because what happens is this, if you use the power of time, the power of compounding, you will have so much more but you got to put it all. in and i always advise people, take the max, take the max, take the max. enough with the would have, should have, could have, people. don't play the if only game. you'll be surprised how much better your decision making is to quote the great syndromely lauper, i see your true colors shining through. it's sage investment wisdom. i'm answering the questions you've been sending me on twitter. twitter. ♪

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let me give you a piece of advice that would have saved me a lot of cash, and even more

heartache back when i was running money professionally, but i didn't know it this is some genuine sage investing wisdom from the late, great maya angelou when someone shows you who they are, believe them the first time now i know she wasn't actually talking about publicly traded companies, but man, if the shoe fit, wear it all night i've been trying to hammer home important bedrock principles of investing. this is another essential one. when some company shows you who they are, believe them the first time or to put it as bluntly as possible, when a ceo tells you the business is bad, take their word for it. don't try to make excuses. don't bend over backwards finding justification so you can keep owning the stock of a company that's knots not delivering just get the heck out. at least until the smoke clears and you can better assess the damage the better i do for my charitable trust, it's because of this rule the worse i do, you know what i'm talking about. let me read you the previous maya angelou quote, because

there is another really valuable insight in here. she continues, "people know themselves much better than you do that's why it's important to stop expecting them to be something other than who they are. all right. same thing holds true in the corporate world. company executives are almost always going to know their business better than you will, unless they're being ridiculously negligible. they have access to information you don't. they can spend 80 hours or week or more running their company. you your own job and even if you manage money full time, there literally aren't enough hours in the day to devote half that time to a single stock in a diversified portfolio. that's why it's so important to listen to what these ceos and cfos have to say whether on the quarterly conference call or when they come stroyngt show or even someone else's show, high level executives, they are your best resource i wouldn't have them on if i didn't think that don't get me wrong. you can't just take everything that comes out of a ceo's mouth as gospel. there are plenty of executives who are excessively promotional

or talk like they have rose colored glasses welded on this to their face. i find what i'm really looking for are people who aren't wearing these, okay? these are actual rose colored glasses. all right. anyway, try to ask more skeptical questions whenever my cockeyed optimism alarm goes off during these interviews because i don't want to -- i can't have you get snowed by watching the interviews that i do occasionally ceos can be misleading, almost never flat-out dishonest, though, because lying about material information is a crime so sometimes you need to take what they say with a grain of salt, if not a full carton of morton's iodized but the more cynical among you would be surprised by how many straight shooters you'll find at the heist levels of corporate america. i really believe that. don't -- i don't want to be too cynical here and, again, when we have someone on the show with a track record of being ex-trootremely candid, point that out

when honest executives tell you that something's gone incredibly awry, you should believe them. when it's gone incredibly well, it might be a reason to buy. this can be a very profitable strategy let's take an example. when mark benioff of salesforce.com came on the show during the depths of the great recession and told us his cloud-based software company would be just fine, you had to grit your teeth and buy it from november of 2008 to july of 2018, salesforce gave you a 1,8900% gain and you had to get in it when he said things were fine when patty doyle came on and told us how he was going to turn things around, his stock was trading at 10 bucks. when he retired dominoes was at $282 wow. these guys deserve the benefit of the doubt if you didn't trust them you missed out on some monster moves. and, look, i don't want to be too proud here, but i said hey, listen, i believe this guy

that's what helps. it helps to have me say it because i've thought about this a lot and talked to a lot more ceos than pretty anybody in the world. more important, if management tells you something is wrong, you should take them extra special seriously, specifically when a company preannounces a shortfall you need to wait at least 30 days before you think about buying that stock. a lot of people are tempted to buy these negative preannouncement names as they're pummelling on to bad news to new lows they figure the bad news has to be baked in other than rare exception, the opposite is the case when business is so ugly that a company is forced to come out early and cut numbers, i typically think it means more bad news ahead or they wouldn't say anything why? it comes back to maya angelou. when someone shows you who they are, believe them the first time that negative preannouncement is the first time when management announces a bad quarter, they're not just looking at the past. they're looking at the order book to their future believe me, if there were any hope that business would get better, the company wouldn't have to cut numbers between its regularly scheduled quarterly

reports if they thought that maybe something could get better, not worse in the next 30 days, they keep their darn mouths shut and wait that's why i recommend waiting that 30 days to see if anything improved before you even think about buying that kind of stock. this will really keep you out of trouble. because i can count on one hand the number of times when things got better within a month. sure, now you're going to miss some great opportunities like i said, maybe a half dozen. and sometimes the stock bottoms early. but most of the time, after 30 day, you'll have sidestepped yet another brutal leg down. i know 30 days sounds arbitrary, but i've done a lot of homework on this particular question. i've found it usually takes at least a month for the bad news to get fully baked into the stock praise, if not longer. the bottom line, sometimes it can seem like we live in a post truth world where it's impossible to know who to believe on any particular issue. but even the most skeptical among you should believe executives when they preannounce an earnings shortfall. believe me, these people don't

like slashing their own numbers. they do it because they don't see much hope of things improving by the time their company's scheduled to report its next quarter there the wake of a shortfall, you have to presume the stock won't be bounce back any time soon for the next 30 days, treat the darn thing as a falling knife. even if you're not a huge fan of maya angelou's poetry you should trust her investment advice. stick with cramer. da

i spent a lot of time tonight talking about the many ways in which you can make mistakes [ buzzer ] and the need to guard against them by knowing when to admit that you're wrong. let me be clear. the market can be just as wrong as any individual investor the market makes mistakes every single day so this is my next big picture lesson for you don'tassume that the action necessarily makes sense. a lot of times stocks go up or down for the wrong reason or no reason, or an outright stupid reason when a company reports earnings and a stock goes down there, is a natural impulse to believe that the company must have

disappointed -- [ crying ] -- it must have been a bad quarter, right why else is the stock going down you know what? often that will be true. but it's not always true sometimes there are other forces at work. stocks will go down. initial earnings release and bounce back when management explains things on the conference call, or vice versa is a, which is why i'm always telling you not to jump to conclusion until after you've listened to the call, which is a huge drag but it must be done. especially when we're in the middle of earnings season. with hundreds of companies reporting every day, the market makes a ton of mistakes. but it's not just about errors in judgment. the truth is stock prices do not always reflect the underlying fundamentals the fundamentals are big part of it over the long-term, i say the most important part, which is why i spend so much time focusing on them and how to understand them. but they're not the whole picture. you have to understand the stock market is first and foremost a market of stocks and just like any other market, it's prone to all sorts of distortions. when adam smith wrote about the invisible hand of free market

capitalism, he forgot to mention that's it the hand of someone with bad reflex, lousy coordination and possibly some sort of neurological disorder. in short, stock prices do not somehow reflect reality all the time as if by magic. there is as much a product of a perception on wall street and the mechanics of money management as they a product of the actual finances. this is why it's possible for you to beat the performance of the averages by investing in individual stocks. the market worked perfectly, you've never be able to exploit any opportunities because the whole point of this game is to spot stocks that are mispriced so why do i bring this up? because when the action is irrational, kit be very frustrating. i want you to take advantage of the prices that are simply wrong, or at the very least i don't want you to throw up your hands in disgust and giving up on the whole enterprise because nothing makes sense that would be bad remember what i always say about

stocks in greatest wealth engine every created. i spent a lot of time auching about the etf israelization of stocks as this has become a major issue for the market for most of my investing career, you could bank on the fact that most of the stocks came from a sector, meaning how the sector was doing and how wall street felt about it and the other actions from the company itself, management in other words, your average company was in control about half of its own destiny. and this was good situation for stock pickers as long as you made sure to avoid sectors that were out of favor with the wall street fashion show. you could generally do pretty well by researching companies and trying to predict which ones would do better than their competitors. but the rise of etfs, that's changed equation especially sector etfs, but especially the gimmicky ones that are made up of fang, facebook, amazon, netflix and google even the stock have by incredibly well run companies can get dragged down fang is the most ridiculous

example because when netflix catches a cold, the other three stocks sneeze. even if netflix has little to do with the advertise based business of facebook a lot of times you'll get situations where sellers throw the baby out with the bath water. if the worst company in an industry reports bad numbers, the whole group tends to go down, even if everyone else is doing well and those are your opportunities. you got to pounce. >> buy, buy, buy >> sometimes the market is just obtuse you'll see companies report good quarter after good quarter to no real effect. and suddenly a money manager figures out that, yes, things really going well. the next time that business reports a strong number, the stock soars. in those cases, you just need to be patient the caveat here, though, is sometimes when the market makes a mistake, it's not worth trying to fight it because while markets are often irrational, they can remain irrational for longer than you can remain solvent. to borrow a phrase from john maynard keynes who is an

important economist who is a good money manager, your goal sheer not necessarily to be right, it's to make money. sometimes that means being a little cynical about other people's expectations. but here is the bottom line. don't just assume that stocks that go down deserve it. in the immortal words of clint eastwood in "unforgiven" deserve's goth nothing to do it. the market is going to make mistakes your job is to progress when it's doing something wrong and to try to take advantage of it stick with cramer.

i love hearing from the smartest audience in television. that's you, cramerica. so let's get to some tweets. first a tweet from @brick hand 65 he says @jimcramer, jim, why when a caller named richard calls in, do you and the staff say his name in a high snitch okay, well that's a reference to the movie "tommy boy" chris farley and david spade let's say a caller is named richard, we say -- >> richard >> thank you now a tweet he says hi, jim cramer any advice for new parents investing for the newborn child? so many options out there. do a uniform gift of minors to get started then you can do something to state by state. buy growth stocks. they've got their whole lives ahead to make the money back

buy high quality growth stocks the likes of which we talk about all the time on this show. next saup twit from @stall cup wend different she says @madmoneyoncnbc, i work with male teens, and they think you sound like master yoda, lol. i'm learning, and so are they. thank you, jim cramer, aka master yoda. you're awesome okay. yeah all right. yep, that's precisely why my life loves me so much. okay here is a tweet from @russ benson 5 jim, other than banks, who benefits from raising interest rates? you know what? not really many other companies. i think that as a corollary, when rates go up, people think that the economy is really strong and therefore people buy the industrials. but the banks are the ones that benefit directly because they're able to charge you more when you go for a loan. they make more money from your

deposits and they lend them out when rates are going higher. and now a tweet from joey. he asks, jim, i absolutely love get rich carefully will you be writing another book any time soon? a very interesting question, joey the economics of book publishing has changed radically. i'll work my butt off on something like, this and i'll work most nights and almost every weekend. then i'll read the book. and it used to be a very lucrative business to write books. now it's just a labor of love. and i have other labors of love i want to perform, including my garden here is a tweet from amy, and she says i may not always watch @madmoneyoncnbc @jimcramer , but when i do, i take notes so i can do my research later i have to tell you, whenever i'm out with people, and i will say this references, because my late dad would always say this too. particularly some people who are

elderly who play the stock market, they always come out with these long lists of what they took down and i absolutely love it and they'll go over whether they like this, like that it happens all the time to me. and i just think it's terrific i think younger people don't know how to write down on a piece of paper anymore that's the difference. they are immediately putting into it their cell phone they have 2340 list because they have no pencil and they have no paper. here is tweet from @clean pros one. they ask, love the show, jim, you explain annuity investments? i'm 43 with a decent retirement nest egg and term life insurance. are we better with annuities or individual stocks? i would say, and my friend ken fisher certainly, he has ban big process, i would say pick individual stocks and term life insurance is a fantastic buy i think you're doing things very right. but i like you to be in control of your destiny. no fees whatsoever when you buy individual stocks other than the commissions. and here is a tweet from@gearhead 531. and he asks, what is really

going on with inexpensive stocks with high yields for example, a $7 stock with 11% yield? thank you, love the show what's going on there is a classic red flag meaning that people have gotten way too complacent and when a yield is that -- a dividend is that high, distribution is that high, it is often unsustainable. i want you to be very careful of that kind of situation here is tweet from @jay stanley 023. can you suggest reading for a young first-time investor? i want you to go amazon and hit up the name peter lynch, okay? and look at one up on wall street that's the book i cut my teeth on it's the book you can cut your teeth on all right. well, that's all our tweets. so stick with cramer

what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley you mighyour joints...ng for your heart... or your digestion... so why wouldn't you take something for the most important part of you... your brain.

with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back... i like to say there is always a bull market somewhere i promise to find it for you right here on "mad money."

i'm jim cramer see you 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." ♪ jared joyce, a serial inventor who's hoping to sell the sharks on one of his many ideas. this is going to be fun. my name is jared joyce. i'm an inventor/entrepreneur, and today, in exchange for $250,000, i'm offering you 25% equity