"options action. catch us next friday at 5:30 p.m. eastern time. "mad money" with jim cramer starts right now have a terrific weekend. i'm here to level the playing field for everybody. "mad money" starts now hey, i'm cramer, welcome to "mad money," if you want to make friends i'm trying to make you money. my job is not to entertain you, but to educate you call me at 1-800-743-cnbc or tweet me i'm constantly telling you that discipline always trumps conviction i say it over and over again in other words, no matter how much you make, no matter how

enthralled you are with the underlying company, if the rules say -- sell it -- you sell it. one thing i've learned in my investing career, no matter how much you might believe in something, you violate the rules of the road, at your own peril but where the heck do these rules come from? it's not like they were handed down from on high and carved into stone not like the laws of physics, you can't just deduce them from observing the way the market works. the way you can do say gravity the rules come from experience in particular, my experience i've spent nearly 40 years in this business. and in that time you better believe i've learned some powerful lessons in many cases i learned them the hard way because i don't want to you repeat my mistakes, because-day want you to have the benefit of my whole career, i want to lay out some of my most important rules for investing.

the stuff i live by. some of the stuff may seem basic. but you forget the rules at your own peril. back at my old hedge fund where i was for a long time, i would convince myself it was okay to make an exception, to have a cheat day, ignore my discipline for just this once it seemed compelling at the time whenever i broke my rules, let's say i got burned >> it's like that old joke about the guy who goes to the doctor and says doctor, doctor, it hurts when i stretch out and shake my hand around to which the doctor replies -- then don't do that what should you be doing or not doing? let's stick down my most important rules for investing. starting with number one -- bulls make money, but bears make money. and pigs -- they get slaughtered. look i say this all the time

because so often in my career i've seen moments where stocks went up so much that people were intoxicated with their gains they thought they were geniuses. precisely at this point of intoxication that you need to remind yourself not to act like a pig. i first heard this phrase on the desk of the legendary steinhart partners, i would be having a big run in a stock and the legendary michael steinhart would tell me that i made a lot of money perhaps too much money i had no idea what he was talking about. i was grateful i caught a major gain not that long after we got a vicious sell-off and i gave back everything i made and then some. that's when i enshrined the bulls make money, bears make money, pigs get slaughtered thesis into my rules. now it's deeply ingrained, now i've got sound effects to tell the story. just to be clear

bulls don't have a monopoly on piggishness. the same idea applies to investor who is press their bets too aggressively other than the dot-com burst in 2000 and the financial crisis in 2008-2009, systematic risk, most stocks did bounce back pretty quickly. at this point you made a killing if you went long at the lows of 2009 if you stayed short and were a pig and got greedy, bet against the market when it was going down, you got slaughtered. it begs the question -- how do you know when you're being a pig? there's no such thing as stupid questions, only stupid answers, but you don't need me to tell you when you're being a pig. if you didn't feel greedy when we hit an all-time high on the nasdaq in 2,000, you don't need investment advisers. you need a psychiatrist. if it's profits and you side-stepped a huge decline.

if you let your winners ride you lost a fortune the financial crisis is even more stark if you were walking around owning a huge amount of stock in 2008 as the banks started dropping like flies, you were beyond piggish why is the rule so important one of my chief goals is to help you stay in the game the hardest part of investing is holding on through difficult periods, taking short-term pain for long-term gains. the people who got wiped out by the dot-com collapse, they tend to be the ones who never took anything off the table where did they live? they never felt greedy in their piggishness, it got them slaughtered. 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's 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

because you never know when stocks you own are going to really get crushed you never know when the market could be just, you can't have certainty. if you assume stocks will keep going up forever in a straight line i think you're going to be in for a world of hurt surely there will be times when stocks keep going and going and going. i coined the term faang a few years back for facebook, amazon, netflix and google which became alphabet, they continued to move up and up and up i felt like a pig after the stocks extremely positive move i felt like a fool when the stock kept galloping, that's the price you pay for following the rules. for every huge pile of cash that gets left on the table with a situation like amazon you're side-stepping gigantic losses like the kind you would have had if you would have stuck with the

market in 2000 and 2008. so never forget, bulls make money, bears make money, and pigs get slaughtered i'll keep on repeating it, forever. with the sound effects, because it is just that important. >> rule number two it's okay to pay taxes they're inevitable and unavoidable. yet the aversion of paying taxes on stock market winnings borders on the pathological. many times people have gigantic gains but refuse to take any profits because they don't want to incur taxes that cut into the winnings 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 from a prominent hedge fund manager who recommended buying the stock of macy's because of the real estate value thy run a

great deal and was ripe for profit taking. i knew people who had owned it for years with hefty profits and they didn't want to ring the register, why? they would have had to write a check to uncle sam next thing you know, the stock of macy's is cut in more than half, and it wasn't a two for one split. it hit a tipping point courtesy of competition from amazon and it got crushed those who didn't want to share the profits with uncle sam ended up with no profit at all what kind of lesson is that make your peace with the tax man. some gains are simply 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 the last thing you need is to be worried about capital gains taxes. when it's time to sell, you sell in short, stop fearing the tax man. start fearing the loss man you won't regret it. and i'm not saying blow out of everything i'm saying take some profits bottom line, remember my top two

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

my first stock trades were one share, five shares, seven shares you need an index fund to get started until you build up wealth and then can you do it. how about giacomo in illinois. >> caller: hi, thanks so much for taking myle call recently you talked about how first-time investors or younger investors should you know, stay away from riskier asset classes until they have $10,000 allocated in mutual funds or exchange-traded funds. >> yes >> caller: my question for you is, seeing all these crazy bull market that we've got going on, the seeing the market ramp up, seeing crypto krebcys go up, if i don't have $10,000 in mutual funds what should i be doing do i sit around and let opportunities pass and wait it out? and wait until i have my savings. >> i totally understand -- i want people to be able to save that's my principal goal if you want to put some money aside, and do what i think is basically doing some gambling with it, i'm not going to stop

you. but the thing that i most care about is getting people to save. as long as you understand the risk, i'm okay with it but i cannot back away from index funds as the fundament of how you invest jeff in california >> caller: this is jeff at lake tahoe, thanks to you and your staff for your informative and helpful program. i have a two-part question pertaining to interest rates, and specifically yield curves. can you explain to us home gamers how, what a flattening yield curve means? and more importantly, why do the analysts say when there's inverted yield curve, that it portends recession coming and the last part of my question is, what happens if the 10-year t-bill goes over 3%? how will that affect the stock market in 2018 and grab your skis and come out and see us here in tahoe

>> you're very kind. i love lake tahoe, i use to play cards on the nevada side inverted yield curve, fed has raised rates too high, rest of the curve goes down, out, five, 10, 20 years that is a curve that has shown in many cases to lead to recession. but other cases, not so i'm not, i'm not hard and fast in that rule. i do think that as rates go up, business does slow that's undeniable. we are such a low rate and business is so strong. that we can afford it. mike in california, mike >> caller: good afternoon, mr. cramer >> mike. >> caller: two things, one, first thanks for take mig call number two, thanks for leading us 9-to-5ers down the path to a little extra money here's my question, i know you're in a hurry here >> i'm fine. >> caller: concerning dividends. want to know, do you take the

money and put it in your pocket? or do you put it back in the stocks and if you do, how do you make that work and how do you set that up? >> you got to do dividend reinvest do dividend reinvest a check-off, but you have to my got to give the dividends away always hurt the performance. i tell club members, please, reinvest just take that money, because there's nothing like the compounding of the 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 don't be greedy, be disciplined. and don't be afraid to pay the tax man on profits you've earned i'm putting my four decades of experience to work tonight. counting down the most important rules for investing to help you

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news flash, at the end of the day we're only human if you remember only one thing about being an investor, that's it nobody's perfect. everyone is fallible it's inevitable that we're going to make mistakes it's the nature of the business and the nature of humans that's why if you're going to own individual stocks, you need to follow a set of rules rules that are designed to protect you from yourself. rules that i learned the hard way and that brings me to my next commandment this is a real important one never buy a stock all at once. i can't stress it enough do not under any circumstances buy all at once. no broker likes to fool around with partial orders like i'm

telling you to give. no financial adviser has the time to buy stocks methodically over time. the game is to get the trade on at one level in a big way. make the statement buy, get the position on the sheets or in the portfolio. but from where i stand, that's all wrong. 100% wrong you should never buy all at once and you should never sell all at once instead what i want you to do is stage your buys. stage your sells use this, 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. why? okay when i first started out as a professional money manager, i wanted to prove to everyone how clever i was and how right i would be if i felt like buying caterpillar, i would buy it now, buy it all i would make sure i was right. as if i were the smartest guy in the universe, no one could be smarter an i am and doing it big. when i think back about that

young kramer with the mostly full head of hair, i was one arrogant son of a gun. i was arrogant and ways wrong. what was my mistake? if i want to buy 50,000 shares of caterpillar, you don't pick them all up at once. that's dumb. what happenes if you it goes down immediately that's my rule, never buy all at once i should have been buying it in increments of 5,000 shares now he it sounds measly if you're a professional, but i'm right. now i know you trade institutionally and the institutional guys say jim, come on, 50,000 is nothing. i no longer trade in size as we say, but i still invest and i invest for my trust. and whenever we have a new name to tell club members, we buy it in small increments, say 500 shares at a time or smaller.

over the course of multiple days, it makes sense, when you buy all at once, you're declaring the stock won't go any lower. don't you think that's crazy no one has that insight. buying gradually in stages recognizes that our judgment is fallible why don't investores if they want 500 shares of exxonmobil, don't they buy it in 50 increments your broker wants to get the trade done my brokers hated in my old hedge fund when i would place incremental orders, but it's irresponsible to put a major chunk of your change in a stock all at once. resist feeling like you're making a statement when you purchase a stock i bought and sold billions of shares of stock, billions, you know how often i got in at the absolute bottom? how often the last price i paid was the lowest and then it was off to the races maybe one trade in 100and i'm good at the game so resist the

arrogance, buy slowly over a couple of days humility beats hubris every time next rule, i want to you buy damaged stocks, not damaged companies, let's say the mall is having a sale and you pick up a piece of merchandise only to find out that it's broken when you get home maybe it doesn't work, maybe there's a hole in it in the real world you can return the merchandise and get your money back there are guarantees on main street wall street is very different. if you buy a stock and it turns out to belong to a defective company, you have to eat the losses there's no caveat emptor here. you need to be careful to distinguish between broken stocks, names down for no particularly good reason and broken companies which deserve to see their stocks trade lower without you. sometimes damaged companies can be easy to discern when valiant, the big pharma roll-up started plummeting, the combination of slowing growth, balance sheet fears and cheating

with one of their pharmacies, it wasn't a good sale to rush toward valiant tumbled from 262 to the single digits. a lot of people thought valeant was downright toxic. on the other hand sometimes stock sells off with nothing to do with the underlying company just because the stock is down that doesn't necessarily mean there's anything wrong with the actual business. so how do we distinguish between a broken company and a broken stock? complicated question what i like to do is develop a list of stocks i like very much. i call this my bull pen. when wall street throws a sale, with the whole market coming down, i use that as an opportunity to pick up the stocks on my list, that was designed in a cooler moment with a cooler head. but the bottom line is that you never really know. and that's why this rule works in tandem with the last one. you never buy a position all at

once because what you think is really a damaged stock might turn out to be a damaged company. if you take your time, you're much less likely to end up with a large quantity of broken merchandise. stick with cramer. duncan just protected his family

with a $500,000 life insurance policy. how much do you think it cost him? $100 a month? $75? $50? actually, duncan got his $500,000 for under $28 a month. less than a dollar a day. his secret? selectquote. in just minutes, a selectquote agent will comparison shop nearly a dozen highly-rated life insurance companies, and give you a choice of your five best rates. duncan's wife cassie got a $750,000 policy for under $22 a month. give your family the security it needs at a price you can afford.

if you want to build a portfolio of individual stocks, the big if, since there's nothing wrong with getting all of your equity exposure from a cheap index fund that mirrors the s&p 500, you got to be rigorous about it. which brings me to my next rule. do the homework. growing up my kids hated homework sometimes when i looked at what they were studying, i found it easy to sympathize what's the relevance of most things they teach in high

school how will it help you later in life why even bother? that's a terrible attitude -- i take that back but as a parent, i always encourage my kids to study you never know what they'll turn out to be interested later in life i bring it up because i think many of you have the same attitude you have when it comes to homework for stocks when i tell people they need to listen to the starbucks conference call or they know what the analysts are expecting from netflix which is always about subscriber growth, they're going 0 to own these stocks, they don't want to hear it, they think i'm being a scold. they just want to own it, they don't want to have to do anything when i say doing the homework. listening to krns calls, reading the earnings reports conference calls but that's plain wrong, people owning stocks without doing the proper research, i regard it as

just plain lunacy. you never want to do that. with you people still do it. and they do it for a couple of different reasons, on the one hand there's the buy-and-hold school of thought. you don't need to keep track of what's happening to a company because you're in it for the long haul as if that somehow makes it all okay. on the other hand you got people who just don't have the time to be that diligent for those of you who don't have the time, i got the solution for you, either get someone else to manage your money or do the smart thing and invest in a low-cost s&p 500 index fund. if you can't devote a few hours a week to your portfolio, you shouldn't be messing around with stocks but it's the buy-and-hold premise that's a lot more pernicious factoring in the 1990s, buy and hold became the be all and end all of investing i'm going to hold on to that cmgi you got to look that one up. because it's got to go back to 100 where i bought it. i could substitute vertical net. i got 100 things coy put in that sentence the experts say if you hold

things for the long term, isn't everything supposed to work out for the best this philosophy took a real blow during the financial crisis, when so many people who practiced buy and hold got wiped out. that's why i've always been evangelistic for buying and homeworking. what's that? before you buy a stock, listen to the conference calls, you have to. you can go to the company's website. can you read the research. read some news stories, google the darn thing everything is available on the web. you have so much more available now. so much more knowledge that there is no excuse you aren't up there begging at the goldman sachs library for some microfiche statements from three months ago, you got all this stuff at your fingerprints. if you fall back on the buy and hold strategy for any group of stocks and don't pay attention, i can assure you you'll be beaten by professional managers with good track records who are searching for high quality stocks all the time. more to the point, i'm quite certain that any index fund can

beat someone who does no homework it's not a strategy. it's just being lazy the next rule is another essential that i harp on constantly diversify, diversify and then diversify some more always be diversified to control risk i'm a firm believer that if you control the down side, the upside will take care of itself. that means managing risk what's the biggest risk out there? sector risk. stocks in the same sector tend to trade together. especially at extreme moments. do you know about 50% of the action in any given stock comes down to its sector in some of these areas, because of etfs, it's even higher, i don't care how a great a tech stock was in 2000. if you had all your eggs in that one group you got scrambled. same thing with financials in 2008 oils from 2014-2016. only one thing from keeping you from getting nailed by the sector risk is diversification that's why we play this game of diversify. i've been playing it since 2002.

diversification is the only free lunch in this business people make fun of me in the office because i saw it so much. it's the only investment concept that works for everyone. if you mix up enough different sectors in your portfolio, at least five, you won't be wiped out when one group gets obliterated. but if diversification is so obvious, if it's such a no-brainer, if every adviser and commentator under the sun has been telling people to do it for years, how is it that anyone can be undiversified i think it comes back again to the homework issue a lot of people simply don't know what they own they couldn't tell you if you bumped into them so they end up with stocks that are frighteningly similar, not even knowing it. i still field quite a few calls from people who generally think that earning faang is a diversified strategy facebook, amazon, netflix and google, now alphabet or another jib new york city matter how much i might like the oil stocks at any given moment, it's usually wrong i can't count on the portfolio

made up of exxonmobil, chesapeake energy and halliburton. equal opportunity disliker bristol-myers and united health. leave you too exposed to health care risk that could overwhelm the whole group. having an undiversified portfolio is not just an amateur mistake. many professionals don't like to be diversified because of the bizarre way that money management works in this country. if you concentrate all your bets in that one sector and the sector takes off, you beat everybody who is diversified that's the nature of the beast a hedge fund manager who does it and gets lucky can market himself as a huge success. get profiled by every magazine raise tons of capital from unsuspecting investor who is don't realize how much risk they're taking on. here's the bottom line whether you're an amateur or professional, you need to do your homework and keep your portfolio diversified. it may not be exciting or sexy this is the kind of of routine maintenance stuff that protects you from monster losses down the

line mike in south carolina mike >> caller: hey, jim, mike from south carolina i was wondering from a new investor, say i'm going to invest about $100,000, how many stocks should be in my portfolio. i start about 30 and i is it not enough >> i would tell thaw after tenure kind of a mutual fund if you're a real stock junkie, can you take on a lot more if you have help like i do for the actual alerts club it's not that bad but 10 is about the maximum that most people can do don't do more than that you won't be able to do the homework roberto in texas >> caller: hi, jim boo-yah. i had a question about -- i'm a new investor, i'm 29 small amount, about $1500. i'm wondering how much to invest in an index fund. >> s&p 500 index fund. 1500 first 10,000 index fund.

then start doing some "mad money. index funds keep you diversified. and we like to diversify, diversify. sure homework isn't fun. but you know what, losing money is worse if you want to avoid monster losses, homework and diversification are key. stick with cramer. no matter where you are in life or what your dreams entail,

a cfp professional is trained, knowledgeable, and committed to financial planning in your best interest. find your certified financial planner™ professional at letsmakeaplan.org.

jtds looks i don't walgd to jtds. when it comes to managing money, you're often your own worst enemy. don't take it personally i'm my own wornt enemy, too. if you want to invest wisely, you constantly need to be fighting off your own worst impulses we're not robots, we have emotions, those emotions can throw you off your game. that's why the theme of tonight's show is discipline trumps conviction, you obey the rules, so that you do the smart thing even when your emotions are telling you to do the opposite which brings me to my next rule for investing, nobody ever made a dime panicking panic, it's not a strategy panic is not a strategy.

you see it over and over again as if it is. a stock gets hammered, then investors sell after the hammering. the market gets crushed. people bail at the end of the day. and in short something gets annihilated and people can't take the pain. so they bolt panic is the operating instinct in all of these cases. there's something basic and instinctive panic about the desire to flee if you're a stone age hunter-gatherer who stumbles in a family of grizzly bears, panic can be helpful but it tells to you run away but it's not a useful emotion when it comes to analyzing the stock market where you're running away when you should be running toward the truth is there will almost always be a better time to sell than in a panic. a better time to leave the table. than whatever moment inspired you to panic in the first place. and don't i know it back in 2010 i was on the air for the flash crash when the market fell 900 points in less than half-hour. i watched the monitor for the

ticker and i couldn't believe what was happening people were dumping stock simply because everyone else was dumping stock. they didn't know why they were dumping it that's what a panic looks like, that's what it looks like. the result to this day people still come up to me and thank me for that advice during the flash crash. i simply put my rule into practice realizing that nobody ever made a dime panicking and i tried to help you profit from it. i did the same thing back in 2016 when we had 1,000-point sell-off over two days, i told people to buy down only using limited orders, and that we did for the trust. we got outstanding buys because we stayed calm and took advantage of everyone else's panic. so the next time there's a big market-wide sell-off and you feel like fleeing -- and never touching a stock again, i want to you do something for me i want you to take the opposite side of your emotions.

the opposite side of the trade when you see one of those high-speed routes of the sector, even individual stock, why not buy a little get a feel for it. see what i mean. the most rewarding trades you can make are those where the decks have been cleared out by terrified folks using market orders who don't get that the exit doors aren't as big as they think you are. i'm not saying that you just buy every stock in a sell-off. they're not all worth buying often when people freak out about an individual company it could be with good reason. but i am saying that it's a rare moment when you won't get some sort of bounce after big decline. so the next time you want to dump everything, take a deep breath and wait for the rebound before you sell rather than rushing to join the fleeing masses, you could get trampled i've got another rule to help you handle big declines. ready? when the stock market gets unrelentingly negative, remember

who he who defends everything, defends nothing. it's true 250 years ago, it's just as true now he who defends everything defends nothing what does that mean it's about how you evaluate your holdings when the market is fine, many stocks are in bull market mode you don't need to worry about your positions more exposure to the bull, the better, right? when things get more difficult and you're on the defensive you need to recognize that many stocks you bought during better times might not fit the new environment. when the economy is slowing and the market is getting slammed, you can't hang on to everything you might want to own. if you try to defend all of your positions in a market that turns against you, that's 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's a buying opportunity every single stock in your portfolio. you keep chipping away if you do that you'll run out of capital, anyone would, leaving you enprepared to buy more if we

do go lower. yet when the market gets negative you need to get more selective. focus your efforts that's why i rank all my stocks at all times for my action alerts plus.com club members, 1's are stocks i buy now 2's are stocks i buy i make this plan not in the heat of battle. and then i know which ones to cut or use as sources of capital to buy the ones. let's say tech is getting hammered but you think it's going to rebound, it's important not to try to hang onto the whole complex. pick the best tech stocks that you'll want to buy on the weakest. toss out the rest as cash. use the cash to buy the stocks of higher-quality tech companies at lower prices. that's right the nonessentials, the ones that have no catalyst and you only own because you want exposure to the bull market. they get the heave-ho when things turn bearish. karen cramer worked with me for years at the old hedge fund used

to call this circling the wagons around your best names the first few times you do it, you'll curse yourself because you might end up slaughtering stocks you've own ford quite some time. after you experience a number of rough markets you realize how valuable this process is because over time you'll end up with great cost bases on the stocks you like. the bottom line -- great investors know how to ignore their emotions when the emotions get in the way of making money the next time the market gets slammed, don't panic nobody ever made a dime by panicking, but don't double down with your eyes closed. vicious negative markets can give you buying opportunities, but you need to focus on your capital, on your absolute favorites rather than chasing bargains and lower-quality merchandise when it turns out they weren't bargains at all rich in new york, rich >> caller: hi, mr. cramer. it's a pleasure. >> how are you >> caller: can you please explain -- i'm good. can you please explain the

technique of buying calls and if it could be or should be used by us home gamers, to boost or pad our portfolios >> it's a great question and the najarian brothers, i don't know if you've seen them. they've done some fabulous work on options and there's option actions on friday afternoon. they could be a low-risk way to be able to limit your exposure and if you get the book, getting back to even, i have 100-page exposition of how to use calls to limit your down side and get maximum upside exposure. "getting back to even. david in california? >> caller: boo-yah jim cramer, thanks for having me i have a quick question, for millennials who are somewhat knowledgeable about the market, where should they invest their money other than faang

>> i like aerospace, a long-term bull market. maybe something in that group. i like a little bit of foreign exposure and think that that's not such a bad idea maybe an etf that has europe because europe is way behind where we are and will be that way for multiple years and then i think if you're really young, why not look at some riskier biotech stocks, you got your whole life to make that money back emotions have no place in investing, they get in the way of making money. the next time the market gets slammed, don't panic, nobody ever made a dime by panicking, sell-offs can give you huge opportunities but you need to do your homework. don't chase and don't buy damaged merchandise. duncan just protected his family

with a $500,000 life insurance policy. how much do you think it cost him? $100 a month? $75? $50? actually, duncan got his $500,000 for under $28 a month. less than a dollar a day. his secret? selectquote. in just minutes, a selectquote agent will comparison shop nearly a dozen highly-rated life insurance companies, and give you a choice of your five best rates. duncan's wife cassie got a

$750,000 policy for under $22 a month. give your family the security it needs at a price you can afford. welcome back to tonight's check yourself before you wreck yourself edition of mad money. i'm a big dleefr in the idea that once you get some money saved up, you are in control of your financial destiny that means you need to be

careful. you're the one with the most power to derail your financial future mistakes always have been part of the investing, you can't rule them out i want to be sure that you don't make the same mistakes twice or three times or endlessly that's why i have rules. rules for investing. to protect you from the kind of misjudgments that i used to make when i was young and inexperienced. rules like for example don't own too many stocks. back at my old hedge fund i would spend three hours every day analyzing the mistakes of the day before you wonder why i retired that was my major task, one that i complete every morning before anyone else came into the office, between 4:00 a.m. and 7:00 a.m i would analyze every losing trade. you don't need to analyze the winners, they take care of themselves i try to figure out how i could have made more money or much more importantly, lost less

money. i was for lack of a better word maniacal about it. after a couple of years i had an epiphany, i realized that good performance could be linked to having fewer positions in short, when we own fewer stocks, we tend to make moren n money. i won't buy a stock without first taking a different one off the table. i try todo that with my childhood trust. you don't just buy shares from more and more companies, you need to limit your holdings, that's a great discipline and one you should adopt pronto. all the bad money managers i know have hundreds of positions. how can you stay on top of more than 30. all the really good money managers have a few names they know inside out. that's why i say don't own too many stocks. i know it can be constraining. you'll end up selling some

stocks that are good for stocks that aren't as good. i know that. hindsight is 20/20 as someone who has owned stocks for 40 years, it's far more likely that you'll be selling imagine nal companies in order to get bigger and better ones, that's how to get a portfolio to work for you that's portfolio manager by the way the time i lost the most money as a hedge fund manager, my sheets, my positions were thick as a brick. when i made the most money, my sheets were about one sheet of paper double spaced. i ran hundreds of millions of dollars, whether you're a pro or amateur, it's almost always possible that you have too many positions. rule of thumb, if you're just investing for yourself, and you own more than 10 positions, that's right if you own more than ten stocks, maybe you ought to pare back a bit you can have too many stocks, but it's very hard to have too much of? cash which brings me to my next rule,

cash is for winners. at times cash is such a perfect investment it drives me crazy how so few people recommend it they hate the market so they're only 95% long. instead of 100%. but they think the market stinks, so they decide to short a few high flyers against their longs. no, and no, that's the wrong way to approach it you don't like the market you don't like any sectors then sell stock, raise cash. don't buy put options on the stocks you own or find other stocks to short against your current positions. the odds simply don't favor you winning on both stocks the short and the long it's a strategy whose goal is mediocrity if you can raise some cash and put it to work at lower levels, that's the best way to protect against a lousy market i was one of the biggest option traders on wall street for a time when i bought put options to hedge my positions i almost always ended up losing money 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. if yous d dislike the market, s some stocks and go into some cash which is literally short-term treasuries with less than a year people talk about how little cash earns, it's earning more than it did a while ago. or say can't be in cash, that's for losers, no cash is ou think there's a major disaster ahead or the market is going down for a prolonged sell-off i grew up in art when i had an edge i can't short it all right now but back when i could, i didn't short stocks for the sake of having some shorts on against the longs. i don't care about not having enough exposure, i care about not losing money so if you don't like the market, if you think there's nothing compelling to buy into any weakness, i suggest that you sell stock and raise cash. go sit on the sidelines, nothing

wrong with that. wait for the situation to improve. believe me, it's never the wrong call when you don't like the tape or you can't find anything that truly makes sense for you the bottom line? always be careful not to own too many stocks and not to have too little cash. stick with cramer. tax day is coming. and then may determine how much your business can save. of your pie. attorney on your side. work for you.

tweets are piling up holy cow let's start with one from

quentin who asks at what age should i put bonds into my tual funds at 25 years old i don't want bonds until very, very late. i like to actually extend it and say not until your late 50s-day want to start seeing a lot of bonds. people live longer than they used to and bonds don't generate enough return how about high-yielding dividends stocks moving on, be one of our next producers, i would like to see from you a show titled typical errors of emotional investing. that's a great idea and i'm going to do it because i do know that over and over again emotional investing produces major mistakes that lead to big losses you got to check them at the door and i will do that for you. another tweet this one from

steve daniels who say says @jimcramer what other types of index funds do you recommend besides the one that mirrors the s&p 500. there's a place call the vanguard, they're terrific, they have a thing called the total return fund. of all stocks. that one is one of my absolute favorites, stick with cramer 300 miles an hour,

that's where i feel normal. having an annuity tells me my retirement is protected. learn more at retire your risk dot org.

your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity. there's always a bull market somewhere, i promise to find it for you on "mad money. i'm jim cramer and see you next time >>

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