yield. it is inexpensive. it is positive earnings growth, and it is the most hated sector in the s&p 500 it is a real contrarian bet. >> dan. >> microsoft calls. >> cvs, sister. >> see you tomorrow at 5:00. 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 peoplewant to make friends. i'm just trying to make you some money. my job is not just to entertain you, but to educate you so call me at 1-800-743-cnbc or tweet me at jim cramer. i'm constantly telling you the discipline always trumps conviction i say it over and over and over again. in other words, 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 -- >> sell, sell, sell sell >> you sell it one thing i learned in my investing career, no matter how much you might believe something, you violate the rules of the road at your own peril. but what the heck do these rules come from? it's not like they were handed down from on high and carved into stone tablets they're not like the laws of physics. you can't deduce them from serving 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 and because i don't want you to repeat my mistakes, because i do want you to have the benefit of my whole career, tonight i want to layout some of my most important rules for investing,

the stuff i really live by some of the stuff may seem basic. but gwagain, you forget the rul at your ownperil at my old hedge fund i'd occasionally convince myself it was okay to make an exception, ignore my discipline once. for some reason it seemed compelling at the time whenever i broke my rules, well, let's just say i got burned. it's like that old joke about the guy that goes to the doctor and says, doctor, doctor, it hurts when i stretch it out and shake my hand around to which the doctor replaies, then don't do that what should you be doing or not doing as the case may be starting with number one, bulls make money, bears make money and pigs, they get slaughtered look, i say this all the time because that's -- 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, too. it was at this point of intoxication you need to remind yourself not to act like a pig i first heard this phrase from the desk of the old trading desk of the legendary stein heart partners i'd be having a big run in some stock and the legendary michael stein heart would tell me i had made a lot of money, perhaps too much money maybe i was being a pig. i had no idea what he was talking about. i was just grateful i caught a major gain of course, not that long after we had a vicious sell off and i gave back everything i made and then some. that's when i enshrined the book bears make money, bulls make money, pigs get slaughtered as one of my rules. now it's so deeply engrained i have a barn yard of sound effect buttons to tell the story. the bull, the bear, the pig.

just to be clear, bulls don't have a monopoly on pigishness. the same ideas apply to investors who apply it over the short side we've had major declines over the years, but the dot-come burst in 2008, 2009, systematic risk, most stocks did bounce back pretty quickly. at this point you've made a killing if you went long at the lows of 2009 but if you stayed short, if you were a pig and got greedy betting against the market when it was going down, you got slaughtered. of course, it begs the question, how do you know when you're being a pig? look, there's no such thing as stupid questions, only stupid answers. 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 in the nasdaq in 2000, and running almost no time flat, you need an investment advisor you need a psychiatrist. if you took profits and side stepped a huge decline

if you let your winners ride, you lost a fortunate the financial crisis is even more stark if you're walking around owning a huge amount of stock in 2008 as the banks started dropping like flies, you were beyond pigish why is this rule so important? it's simple. 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 so you can have long-term gains the people who got wiped out by the dot-come collapse, they tend to be the ones who never took anything off the table where did they live? >> house of pleasure >> they never felt greedy in their pigishness 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 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 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 sure, there will be times when stocks keep going and going and going. when i coined the term fang a few years back for facebook, amazon, netflix and google, which became alphabet, i loved them all i gave up on amazon after an amazing run. it continued to move up and up and up i felt like a pig had an extremely profitable move. i felt like a fool when it kept on galloping bugged me. that is the price you have to pay for following these rules. you need to recognize that 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 had stuck with the market in 2000 and 2008

experiences that turn two generations of investors against stocks, maybe forever, so never forget bulls make money, bears make money, and pigs get slaughtered. and i'll keep on repeating it forever with the sound effects because it is just that important. rule number two, hey, it's okay to pay taxes look, no one has ever liked paying taxes but like death, taxes are inevitable and unavoidable yet the aversion to paying taxes on stock market winnings often borders on the pathological. sometimes people have gigantic games but they simply refuse to take any profits because they don't want to incur taxes -- couple of years ago, for example, 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 the stock had already run a great deal, and it was ripe for

some profit taking but i know people who had owned it for years with hefty profits and think 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 obliterated, cut in half and it wasn't the two for one split. the darn thing just got crushed. those who didn't want to share their 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 ee femoral. the last thing you need is to be worrying about gains taxes when you need 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 everything i'm saying, take some profits. bottom line, remember my top two

rules. bulls make money bears make money but pigs -- and don't be greedy. and a variation of that theme, 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 >> sure, chris, good to have you. >> caller: so, my question is we have a thousand dollars of disposable income and neither of us have a 401(k) match with our jobs we're basically 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 thousand dollars of disposable income >> well, 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 and buildup wealth how about giacomo in illinois >> caller: you talked about how younger investors should stay away from riskier asset classes until they have had $10,000 allocated in mutual funds or exchange traded funds. >> yes >> caller: now, my question for you is seeing all this crazy bull market that we've got going on, seeing the market ramp up, cryptocurrency going up, if i don't have $10,000 invested in mutual funds, what should i be doing? sit around and let opportunities pass and wait it out or wait until i have my savings -- >> i totally understand. a young person -- look, i want people to be able to save. that's my principal goal if you want to put some money aside, some "mad money" aside and do what i think is basically doing some gambling with it, i'm not going to stop you.

but the this can that i most care about is getting people to save if you're saving that way with some risk, as long as you understand the risk i'm okay with it. but i cannot back away from index funds as the fund amount of how you invest. jeff in california jeff >> caller: hi, jeff, this is jim in lake tahoe. thank you and your staff for your informative and helpful program. >> thank you >> caller: 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 did analysts say when there is inverted yield curve that it portends a recession coming and the last part of my question is what happens if the ten-year t-bill goes to 3%, how will that affect the stock market in 2018? and grab your skis and come on out and see us here in tahoe

thanks >> you're very kind. i love lake tahoe. i used to play cards in nevada a yield curve fed raises rates too high, rest of the curve goes down, out 5, 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 hard and fast in that rule i do think as rates go up, business is slow that is undeniable we are at 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: listen, two things. one, thanks for taking my call number two is thanks for leading us 9:00 to 5:00-ers down the right path to make extra money that's my question i know you're in a hurry >> that's fine

>> caller: concerning dividends, do you take the money and put it inyour pocket or do you put it back in the stocks if you do, how do you make that work and how do you set that up? >> you have to do dividend reinvest do dividend reinvest back off basically, but you have to my charitable trust we're not allowed to we have to give the dividends away it hurts the performance i tell members please reinvest take that money. there's nothing like the compounding of a great compound that you get, partly with stocks that have good dividends all right. remember my first two rules, bulls make money, bears make money, pigs get slaughtered. please don't be greedy, be disciplined and don't be a frads to take the tax man on profits you earn it's a lot better than riding things to loss take some off the table. much more "mad money" ahead. i'm putting my nearly 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 jim cramer on twitter have a question? tweet cramer #mad tweets send jim an email to madmoney@cnbc.com. or give us a call at 1-800-743-cnbc miss something head to madmoney.cnbc.com. do you have concerns about mild memory loss related to aging? prevagen is the number one pharmacist-recommended memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life. - stand up if you are first stand up if you're a mother. if you are actively deployed, a veteran,

or you're in a military family, please stand. i will tell you this, southern new hampshire university can change the whole trajectory of your life.

news flash at the end of the day, we're only human if you remember one thing about being an investor. that's it. nobody is perfect. everyone is fallible it's inevitable 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 stock, you need to follow a set of rules rules that are designed to protect you from yourself. rules that i learned the hardware, 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. now, no broker likes to fool around with partial orders like

i'm telling you to give. no financial advisor has the time to buy stocks methodically over time. the game is to get the trade on at one left 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 -- 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'd be if i bought caterpillar, i'd buy it now, buy it big, all at one price. i was so sure i was right. put me up on 50,000, that means buy 50,000 i was the smart guy in the universe, no one could be

smarter than me. when i think about that cramer, full head of hair, i was one arrogant son of a gun. i was arrogant and i was wrong what was my mistake? if you want to buy 50,000 shares of caterpillar, you don't pick them all at once that's dumb. what if it goes down immediately? you feel like a dope that's my rule never buy at all once. i should have been buying in increments of 5,000 shares i know it sounds measly if you're professional. you can cross your fingers, hope it goes down so you can buy it at lower levels and get a better cost basis institutions would say, jim, 50,000 is nothing. i no longer trade-in size, as we'd say, but i still invest i invest for my charitable trust and follow along at axa ler

action alerts.com. over the course of multiple days it makes sense when you buy all at once, you're declaring the stock won't go lower. no one has that kind of insight. buying gradually in stages is recognizing the judgment is fallible with why don't more people do it my way if investors want 500 shares of exxon/mobil buy it in increment? i think it's because they want to be big, too they don't want to waste the broker's time. the broker wants to get the trade done i know my brokers hated it when my hedge fund when i would place incremental orders like i'm describing it's hubris to put your investment in stock all at once. who knows it won't go free fall after? that's why it feels like you're making a statement when purchasing stock i bought and sold billions of shares of stock, billions. when i got in at the absolute bottom, the last price i would pay was the lowest and off to the races?

maybe one trade-in 100 i'm good at this game. as i tell the action alerts.com club buy damaged stocks, not damaged companies. let's say the mall is having a sale and you pick up a piece of merchandise. only way to find out it's broken when you get home. maybe it has a hole. in the real world you can return that merchandise and get your money back there are guarantees and warranties galore on main street wall street is very different. if you buyi a stock and it belongs to a defective company, you have to eat the losses that's why you need to be very careful to distinguish between broken stocks, names that are down for no particularly good reason, maybe some mack crow cause and broken company that sees their stock trade lower without you. sometimes it can be easy to discern. when it started plummeting from 200 in 2015, combination of slowing growth, balance sheet

fears and should i kainery with one of their pharmacies, it wasn't a good sale to rush toward value tumbled from 262 down to the single digits before it bottom some thought it was worth 100, 150, it was like an auction going down the ongoing problems meant the stock was down right toxic sometimes the stock will sell off for reasons that have nothing to do with the underlying company it could be etfs, problems overseas just because the stock is down that doesn't necessarily mean there is anything wrong with the actual business. how do we distinguish between a broken company and broken stock? complicated question what i like to do is develop a list of stocks i like very much. i call this my bullpen in the action alerts.com club when wall street throws a sail with the whole market coming down, i use that as an opportunity to pick up 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 turnout 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. >> announcer: the earnings are relentless, but cramer has burned the midnight oil and he's run ready to run the gaupt let all week cramer sits down with some of the market's influential c-suite players. join "mad money" for must-see interviews you can't afford to miss

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 have to be -- about it which brings me to my next rule, do the homework. listen, growing up my kids hated doing homework they thought it was punishment sometimes when i looked at what they were studying, i have to admit i found it pretty easy to sympathize with their point of view what's the relevance of most things they teach in high school how will it help you later in life why even bother? of course, that's a terrible attitude i should take that back. but as a parent, i always encouraged my kids to study because you never know what you'll turnout to be interested in later in life i bring this up because i think many of you have the same attitude with the homework you have to do with stocks you expect it might be as irrelevant to your portfolio as schoolwork to my kids. listen to the starbucks conference call which is a good one. or know what analysts are expecting from netflix and subscriber growth. if they're going to own the stocks, they don't want to hear

it they just want to own it they don't want to have to do anything doing homework means listening to conference calls, reading research reports, they look at me as an old-fashioned teacher, asking way too much in this busy 21st century world but that's just plain wrong, people owning stocks without doing the proper research, i regard it as just plain lunacy. you never want to do that. >> they know nothing >> but people still do it. and they do it for a couple different reasons. on one hand there's the buy/hold school of thought. you don't have to keep track of what's happening to the company. you're in it for the long haul as if that makes it all okay oeshd, you have people who don't have the time to be that diligent for those who don't have the time, i have 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 fund. if you can't devote a couple hours a week to your portfolio, you shouldn't be messing around with stocks. it's the buy and hold premise

that's more pernicious it became the be all and end all of investing i am going to hold onto that cmg i. you have to look that one up, you have to google it. it has to go back to 100 where i bought it. oh, man, i could substitute vertical i have a hundred companies i could 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 of course, this philosophy took a real blow during the financial crisis when so many people who practice buy and hold got wiped out. that's why i've been an evangelist for doing homework. you have to listen to a kochk, that's the minimum you can go to the company's website. you can read the research. read some news stories google the darn thing. everything is available on the web. everything there is so much more available now, so much more knowledge that there really is no excuse. you aren't up there begging at the goldman sachs library for some microfiche statements from three months ago

remember those like plastic sheets in that was ridiculous. you had all this stuff right at your fingertips. if you fall back on buy and hold, you'll be soundly beaten by professional managers with good track records who are actively search being 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 is another essential i harp on constantly diversify, diversify, and diversify some more. diversify to control risk. i'm a firm believer in the idea that if you control the downside, the up side will take care of itself controlling the downside means managing risk. what's the biggest risk out there? sector stocks in the same sector tend to trade together, especially at extreme moments. did you know that about 50% of the action of a stock comes down to its sector? in some areas of etfs it's even

higher i don't care how great a tech stock was in 2000. if you all your eggs in that group you got scrambled. financials in 2008 only one thing can keep you from getting nailed by this sector, that's diversification that's why we play the game of am i diversified i've been playing since 2002 it's the only free lunch in this business people in the office laugh at me it's the only concept that works for everyone if you mix up enough sectors, at least five, you won't get wiped out if one gets obliterated. if it's such a no-brainer, if every advisor and commentator under the sun has been telling people to do it for years, how can anyone be so undiversified i think it comes back to the homework issue people simply don't know what they own they couldn't tell you if you bumped into them they end up with stocks

frighteningly similar. i field a few calls from people who don't think fang is a diversified strategy facebook, amazon, netflix and google i call faux diversification. no matter how much i might like the oil stocks, i can't have a portfolio made up of exxon/mobil and halliburton. i'm an equal opportunity just like her they just leave you way too exposed to health care risk that could overwhelm the whole group all at once. it is not just an amateur mistake. -- that sector takes off. you'd beat pretty much everybody diversified out there. that's the nature of the beast a hedge fund manager that does that is lucky, can then market

himself as a huge success, in every magazine, unsuspecting investors don't realize how much risk they're taking on here's the bottom line whether you're an amateur or professional, you always need to do your homework and be diversified. may not be exciting or sexy. this is routine maintenance that protects you from monster losses down the line. mike in south carolina, mike >> caller: hey, jim, it's mike from south carolina. >> thank you for calling >> caller: i'm wondering, i'm a new investor, $100,000, how much stocks should be in my portfolio? i have 30, i don't know if that's a lot or not enough >> i would tell you after 10 you're kind of a mutual fund if you're a real stock junky like i am you can take more on if you have help like i do for action alerts, 10 is the maximum most people can do you won't be able to do the homework go to roberto in texas,

please roberto. >> caller: hi, jim, booyah >> booyah. >> caller: primerica, i'm a new investor, i'm 29 accounts, i have a small amount, $1500 and i'm wondering how i should invest it. in index funds or -- >> plain and simple, 1500, first 10,000 index fund no matter what then start doing some "mad money. don't forget, index funds keep you diversified. and we like to diversify, diversify, diversify sure, homework isn't fun, but you know what? losing money is worse. you want to avoid monster losses, homework and diversification are key. so stick with cramer

look, i don't want to go all zen in the art of portfolio maintenance on you but when it comes to managing your own money, you are often your own worst enemy don't take it personally i'm my own worst enemy, too. what do i mean by that okay 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 really throw you off your game. that's why the theme of tonight's show is that discipline trumps conviction you obey the rules to 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, repeat after me, frankly. it's not a strategy. panic is not a strategy. yet 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 in a huge day people bail at the end of the day. in short, something gets annihilated and people can't take the pain. so they bolt >> house of pain >> sell, sell, sell. >> panic is the operating instinct in all these cases. there's nothing basic and instinctive about fleeing. if you stumble into a family of grizzly bears, panic can be

helpful. it tells you to run away it's not a useful emotion when it comes to analyzing the stock market when 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. it fell in 9 1/2 hours i couldn't believe what was happening. people were dumping stocks simply because everyone else was dumping stocks they didn't even know why they were dumping it and that's what a panic looks like that's textbook. i urged viewers to pick a stock they loved and buy it using limit orders so you won't have to accept a price you didn't like to this day people come up to me and thank me for my advice during the flash crash i put my rule into practice realizing nobody ever made a dime panicking and tried to help you profit from it i did the same thing back in 2016 when we had a

thousand-point sell off over two days i told people to buy down but only using limit orders. that's what we did the for the charitable plus which you can follow by joining the action alerts.com charitable trust. we took advantage of everyone else's panic next time there is a big market wide sell off, and you feel like fleeing and never touching a stock again, 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 >> sell, sell, sell. >> who they don't get that the exit doors aren't as big as they think they are mind you, i'm not saying buy every stock, every panic, every 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 a 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 speaking of hideous down days, i have another rule to help you handle big declines ready? when the stock market gets unrelebtingly egative, remembe he who defends everything defends nothing. that was true when frederick the great said it 250 years ago. and it's just as true now. granted he was talking about battle plans and we're talking about portfolio plans, but the point stands so he who defends everything defends nothing, what exactly does that mean it's about how you evaluate your holdings when stocks are in bull market mode, you don't have to worry about your position. but when things get more difficult, and you're on the defensive, you need to recognize many of the stocks you bought during better times might not fit the new environment. in short, when the economy is slowing and the market is

getting slammed, you can't hang onto 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 the portfolio you just keep chipping away. if you do that you'll quickly run out of capital anyone would leave you unprepared to buy more if we do go lower, maybe appreciably lower. when the market gets negative, you need to get more selective, focus your efforts that's why i wrangle my stocks at all times for my action alerts.com club members ones are stocks i buy. threes are stocks i'd sell maybe into strength. that way i know which stocks to defend when things get tough i make this plan not in the heat of battle. and 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's going to rebound

it's important that you don't hang onto the whole complex. pick the best tech stocks you want to buy in the weakness, toss out the rest as cash. use the new found cash reserves to buy higher quality tech as lower prices ones that have no catalyst and you own because you wanted exposure to bull market. they get the heave hoe karen cramer worked with me for years at mile old hedge fund we call it circling the wagons around the best names. first time you do it you'll curse yourself eventually after you experience a number of rough markets, you'll realize just how valuable this process is because over time you'll end up with great cost bases on the stocks you really like. the bottom line, great investors know how to ignore their emotion whz those emotions get in the way of making money. so the next time the market gets slammed, don't panic nobody ever made a dime by panicking. also don't double down just with your eyes closed and the whole

portfolio in weakness. this is negative markets can give you buying opportunities, but 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, rich >> caller: hi, mr. cramer. it's a pleasure. >> how are you >> caller: i'm good, thank you could 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? >> look, it's a great question the nazarian brothers, they've done some fabulous work on options and "options action" friday afternoon they can be a great way to limit your exposure. if you get the book getting back to even, i have a 100-patience

exposition of calls to limit your downside to limit your exposure getting back to even david in can have. david. >> caller: booyah, jim cramer, thanks for having me >> i'm glad you called >> caller: quick question. for millennials who are somewhat knowledgeable about the market, where should they invest their money other than fang? >> you know what, there's a lot of different fang-like names in all sorts of different industries for instance, i like aerospace that's a long-term bull market maybe you get something in that group. i like a little bit of foreign exposure and i think that's not 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 that, you know what, if you're really young, why not look at some riskier biotech stocks, got your whole life to make that money back all right, remember, emotions have no place in investing. they get in the way of making money. so the next time the market gets slammed, please don't panic.

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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 some money saved up, you are in control of your financial destiny but that also means you need to be very careful because you're the one with the most power to derail your financial future look, mistakes will always be part of the investing game you can't rule them out. i just want to be sure that you don't make the same mistakes twice or three times or endlessly for that matter. that's why i have rules. rules for investing to protect you from the misjudgments i used to make when i was young and inexperienced. rules, for example, don't own too many stocks. back at my old hedge fund, i

would spend three hours every day analyzing mistakes of the day before you wonder why i retired made myself sick to my stomach every single day that was my major task, one that i complete every morning before anyone else came to the office i do it generally between 4:00 a.m. and 7:00 a.m. some people are night owls, i'm an early morning owl. i would analyze losing trades. you don't need to analyze the winners. they take care of themselves i looked at how i could have made more money or lost more money. after a couple of years i had an epiphany i realized good performers could be linked to having fewer positions. in short, when we owned fewer stocks, we tended to make more money. it was axiomatic that's why ever since i won't buy a stock without buying a dip off the table. i try to do that for my charitable trust which is the only way you can do it these days you don't just buy shares in more and more companies.

you need to limit your holdings. that's a discipline and one you should adopt pronto. all the money managers i know have hundreds of positions they can't keep track of those i don't know how the heck you're supposed to stay on top of more than 30. all the really good money managers have a few names they know inside out which means they can buy confidently on the way down when the market goes awry that's why i say don't own too many stocks. now, i know it can be constraining you wiped up selling some stocks that are good for stocks a that aren't as good i know that. hindsight is 2020. take it from me as someone who has owned stocks 40 years. it's far more likely you'll be selling marginal companies in order to get bigger and better ones that's how to make a portfolio really work for you. that's portfolio management. you don't want to be a mutual fund manager, right? you might as well give it to not a inindex fund by the way, the time i lost the most money as a hedge fund manager, my sheets were thick as a brick. when i made the most money, my

sheets were double spaced. i ran hundreds of millions of dollars. please remember, whether you're pro or amateur, it's almost always possible you have too many positions rule of thumb, if you're just n.ing for yourself and you own more than ten positions, that's right, if you own more than ten stocks, maybe you ought to pare it back a bit. you can't have too many stocks, but you know what it's hard to have too much of cash which brings me to my next rule, cash is for winners. the widespread aversion to cash breaks my heart. cash is such a perfect investment it drives me crazy, how few people recommend it. they hate the market so they're only 95% long instead of 100%. or they think the market extinction stinks so they decide to have a few short flyer. no as an investor that is the wrong way to approach things you don't like the market, you don't like any sectors sell stock, raise cash don't buy put options in the stocks you own or find other

stocks to short against your current positions. the odds simply do not favor you winning on both stocks the short and long it's a strategy whose goal is immediate med ioc raty i was one of the biggest option traders on wall street for a long time. when i bought put options to hedge my positions, i almost always ended up losing money when did i major money when i bought put options from low-quality companies that were going to have i thought shortfalls or stocks seemed hopelessly over valued versus the fundamentals if you dislike the market, you don't need to bend yourself into pretzels just sell some stocks and go into some cash which is literally short-term treasuries less than a year variety people talk about cash earned. it's earning more than it did awhile ago can't be in cash, those are losers no, cash is for winners especially if you think there is

a major disaster ahead or the market is going to have a prolonged sell off i grew up in a different time. i only shorted when i had a niche. i can't short for contractor when i had the charitable trust. i didn't short for the sake of having shorts 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 side lines nothing wrong with that. wait for the situation to improve. believe me, it's never the wrong call when you don't like the table or you can't find anything that truly makes sense for you bottom line, always be careful not to own too many stocks and not to have too little cash. stick with cramer. - [spokesman] finish your degree at snhu.edu

the tweets are piling up holy cow, let's start with one from quinten who asked, at what age should i put bonds in my retirement account stocks and etfs at 25 years old. i don't want bonds until very, very late. i like to actually extend it a little here and say not until you are inyour late 50s do i want to start seeing a lot of bonds. why? because people live longer than they used to and bonds don't generate enough return how about high-yielding dividend stocks that's what i'd go with. moving on, could at jermano

be our next producer whatever 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 too big losses you've got to check them at the door, and i will do that for you. another tweet, this one from steve daniels. he says, jim cramer, booyah. what other types of index funds do you recommend other than mirrors -- there is vanguard. they have the total return fund of all stocks. that one is one of my absolute favorites. stick with cramer. and fidelity's rate is higher than e-trade's, td ameritrade's, even 10 times more than schwab's.

plus only fidelity has zero account fees and zero minimums for retail brokerage and retirement accounts. just another reminder of the value you'll only find at fidelity. open an account today.

i always like to say there's a bull market somewhere and i promise to find it for you here on "mad money.

i'm jim cramer, and see you next time ♪ narrator: it started with a simple idea -- match the country's most innovative, passionate entrepreneurs with the most prominent, accomplished business investors. they'd be using their own money and investing in real businesses. we got a deal! narrator: with over $100 million invested in the tank so far and monumental successes... i want y'all to think, who's next? narrator: ...it created a new genre of tv... [ cuban laughs ] even you couldn't have predicted this kind of breakout success. you're not only making profits, but you're creating jobs all across america. narrator: ...and proved that business could be entertainment... [ cheering ]