sell. >> lulu. tim, you are wearing two pairs right now. you got the shirt and something else. i think sentiment is really going to rally. >> guy? >> catch sara on "money movers" each day. i'm into tgog ake a few hot lap money." "mad money" with jim cramer starts right now. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere. and i promise to help you find it. "mad money" starts now. >> hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to make you a little money. my job's not just to entertain but to teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. in a bull market there is nothing worse than watching the averages roar higher while your portfolio sits there barely moving. it makes you feel like a complete dope, doesn't it?

like the stock market must be some sort of total shell game. but really it just means you might be making a few basic mistakes. that's why tonight i'm devoting the whole show to my playbook for taking advantage of a short-term rally. not to be confused with a so-called bear market rally. which is a bogus term people throw around whenever stocks go up at a time when the intelligentsia thinks they should be going down. >> sell sell sell sell! >> yeah, i want to give you my game plan for handling short-term gains. now, i know what a lot of you are thinking. what kind of incompetent doofus needs to make money in a rally? what's next, is cramer going to draw us a diagram explaining how to pick your nose? mad potty training should i just start reading picture books to children? we've already got the animal sound effects. and reading rainbow's been off the air for more than decade. maybe you feel like that's the same level of difficulty as making money when the stock market's on fire. who needs help when the dow's up hundreds of points in a day or even about thor during a

multiday rally? a real run. a buyfest. do you really need my advice to help you deal with huge profits? no, i'm not buying into mo money mo problems. but knowing how to approach a quick run the right way sko make you a better investor. everybody makes money in a big rally. but i'm not here to talk about how to make the most money possible when the market's up big. the most important lesson for dealing with a major short-term move higher is that you always have to work hard to prepare yourself for the future. otherwise, you'll end up letting some great opportunities to -- >> sell sell sell! >> -- sell pass you by. >> sell sell sell! >> that's right. just as we can't give in to despair when the market's down you don't want to give in to euphoria and buy buy buy when the market's roaring. that's not when you should buy.

it is when you should be taking some chips off the table. remember, you don't actually have a profit until you sell something. you aren't making money until the register is rung. and the idea you should buy and hold through both the best of times and worst of times has proven to be incredibly foolish, with only very few exceptions. you need to licen up particularly on stocks with deteriorating fundamentals. that's why i always insist you do your stock homework because how else will you know you what to unload? if you don't want to do it yourself, you can join our club, the cnbc investing club. we do a lot of the homework for you and with you. why is it so hard to sell into strength? good question. let me put it this way. nobody wants to miss a rally. if you sold every stock you own right before a huge up day you'd feel like a stooge. not even larry, curly or moe. maybe the dreaded shemp. let's look at it another way. say, you're in stocks for the rally and you have massive gains but you don't do anything, you let them ride so to speak and then gradually or maybe not so gradually your stocks come back

down, if you let your gains ride until they evaporate how is that different from missing the entire rally? it isn't. making lots of money on a great day or great month or great year is wonderful but you can't see the rally as just a day or a few days where your portfolio went up in value and nothing more. you need to see it as a time to take action. even if you don't fancy yourself a trader and try not to time the market. even if you're like that. and i encourage you to be like that. you have to make an exception for some very good but sharp up rallies. that's what i'm talking about. just as you need to remember the good days during the sell-offs to keep yourself in the game you need to remember the down days when the market's roaring to keep yourself tethered to reality. don't pass up an opportunity to trim your positions just because you're in stocks for the long haul as an investor, not a trader. i'm not telling you to blow out of the positions. that's not what i'm saying. i'm talking about doing some trimming. >> sell sell sell! >> being an investor does not absolve you of the need to have judgment. in other words, you should approach every rally with a grain of pessimism about what's

coming next. that shouldn't be that hard. think about this. like the post-covid meltdown in 2022. not many wanted to sell in 2021. we had an unbelievable bull market where buying the dips made you a fortune. but then the fed declared war on inflation and those gains disappeared. if you had sold stocks gradually on the way up as i told you to do, you were in much better shape as markets spent the next 11 months just getting obliterated. there's nothing brong feeling good about a rally, someone with viral mood swings reaching for cheap scotch lying on a dirty linoleum floor when you get a really bad tape can tell you. i recognize the value of celebrating your stocks when it's good. euphoria is fine as long as it doesn't lead to complacency. complacency is your nemesis. on a big up day you can be thrilled just don't forget you're getting a terrific opportunity to lighten up and sell the stocks. that's what short-term rallies are for. but it's very easy to be swept away by the positivity. when the market's up and everybody's optimistic the last thing people want to do is sell.

once you believe in the market again when everything seems wonderful how could you ever want to sell a snok in theory we all know we're supposed to buy low and sell high but in practice that could be a lot harder than it sounds. this is why we constantly teach you the discipline of selling into strength when you join the club, because we do it all the time in the charitable trust. we peel some off. look, i know the feeling. you're sitting there watching the gains roll in and you feel like selling some stock would be the most insane thing in the world. because what happens when the rally keeps going? doesn't matter. we sell into strength. we also never sell all at once. that way timing is less of an issue. take some off. and if the rally holds up you can sell more later. the name of the game is preparation. while there's no real way to prepare for a rally other than by owning stocks, you can use a rally to prepare yourself for potential down days in the future. it's a little counterintuitive, but it works. the best time to adjust your portfolio is when stocks are going higher, not going lower. think about what you'll need if the market goes south. and consider what you can do for your portfolio today, the day of the rally, that you couldn't do

yesterday. the simple answer is that you can sell part of your position and take advantage of higher prices. remember, we never, ever buy or sell all at oncethat's not my style. but on big up days you can sell in larger increments. in the rest of the show i'm going to go through the whole "mad money" rally playbook and explain what to sell and how to sell it and why you're selling it. but right now here's the bottom line. when the stock market's had a big short-term run, short-term, don't get carried away by the optimism. instead keep your head on straight. check your emotions. focus on the long term. and think about ringing the register. especially on stocks that might be getting too high. more on that later. let's go to michael in pennsylvania for this. michael. >> caller: hey, jim. boo-yah. this is michael in philly burbs. hey. i'm looking to sell my house for about 500,000. and i'm buying a new place for about 350. >> okay. >> and by the time i'm all done i'm probably going to have $100,000 to invest for my

retirement, which -- >> that's terrific. >> i'm looking to do -- what do i do short-term high growth, and what do i do long-term dividends like -- >> okay. now, michael, i have to tell you, i am in a different camp from most everybody else. i want to bet on my long-term life. i want to be able to say look, i think i'm going to live long, all the longevity statistics are very good. i think larry fink agrees with me on this. he's the great ceo of blackrock. i think you should be buying dividend stocks. i'm trying to urge you to not move into cash. dividend stocks are a great way to protect yourself. try to pick ones that are 4%, 5% and i think you'll do very well. and you can do it yourself. i know you can build this. steve in kansas, please. steve. >> boo-yah, jim. how are you doing? >> i'm doing well, steve. how about you? >> caller: i'm great. and thanks for taking my call. >> sure. >> caller: hey, jim, by the way, andy reid says number 3 this year.

>> i love andy reid. coach reid's the best. tammy reid's unbelievable. what a great family. how can i help you? >> caller: so jim, i'm heading into retirement at the end of this year and i have been investing all my life. i'm 100% equities, no bonds. at the beginning of 2022 i moved about 40% of my portfolio into value. so i'm a 60-40 split growth-value. i've been growth all of my life for the most part. what is your opinion about staying with that type of split, 60-40 -- >> well, it's funny, steve. it is right in my wheelhouse. i would not do a thing. i think you're doing it right. i was so afraid you were going to say i'm thinking about switching 20% bonds, 30% bonds. the short-term rates are high. i get that. but i like how you're positioned because you're betting with your life, not against your life. and that's what i teach people to do. all right. when the stock market's had a

big short-term run, please don't get carried away by your optimism. instead keep your head on straight focused on long term. but also think about ringing the register, especially on stocks that might be getting too high. and i know you own some that will be. on "mad money" tonight i'm giving you everything you need to know about market rallies with my "mad money" rally playbook. i'll show you how you can tell whether you're taking on too much risk. when you should use rallies to raise cash. and the things you should never do in a green tape. so stay with cramer. >> announcer: don't miss a second of "mad money." follow @jimcramer on x. have a question? tweet cramer. hashtag madmentions. 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.

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when stocks get hammered investors freak out, they panic, or at least they want to panic. i think that's right. i mean, i obviously don't want you to panic, but that's what people are doing. many don't know what's going wrong. few can easily handle the trauma of big losses. and even the smartest operators want some expert advice. but after more than four decades in thinds i can't recall a single time someone's come up to me and plaintiffly asked jim, the market's rallying like crazy, what the heck do we do? that's unfortunate. because just as you need a playbook to deal with declines like i just mentioned, you also need a rally playbook, a guide that tells you what to do when the market's having a big short-term run. not sell-off but run. i know the perceived wisdom is

nobody wants help in a rally. but you need to reject that idea, that people only need help when the market's lousy. there are all kinds of mistakes you can make when the stocks are going higher. in fact, the rally playbook might be more important than the sell-off playbook if only because so few people think they need one. so here's my first rule for handling a rally. always be really, really, really tough on your portfolio not just on the down days but the big up days. the only time you should be harder on the stocks you own is when you're in the midst of a brutal decline with no end in sight and the need to circle the wagons, meaning dump everything you aren't thrilled to own and use the cash to shore up your positions in the stocks where you have the most conviction. obviously, that's a worst case scenario. how exactly do you get tough on your portfolio? when you need to give every one of your stocks the harshest possible evaluation. suspend benefit of the doubt. assume everything you own is guilty until proven innocent. focus on the worst qualities of your stocks. emphasize the down side. make each and every company you

own prove to you that it's worth holding all over again. if this strikes you as silly or even unfair to your fabulous stocks allow me to explain, please. on a good day or a good week you're ready to fall in love with your positions because they made you so much money. that's typical. but it's also a mistake. you can love your spouse. you can love your kids. you can love your pets. i like one of them. you can love your country. you can even love your car. just as long as you don't become enamored with your stocks. silly pieces of paper that you bought for the sole purpose of making money. they're not going to love you back. in fact, when we're in the midst of a big rally you really shouldn't give your stocks too much credit for making you money. unless they dramatically outperform the rest of the market. even then you need to give your stocks a hard time. when the stock makes you a fortune, the normal reaction is to like that stock. or like it more. however, think about this. most of the time you should like it less for the simple reason the stocks get more expensive when they go higher. during a major marketwide rally unless there's some serious

market-enhancing good news your stocks become pricier and therefore less desirable. if you didn't own them you'd know this, oh, that stock's up too much. for example, no matter how much you like microsoft the company and i do microsoft the stop is more attractive at 250 than 350, correct? in other words, in the wake of a big up move your entire portfolio just got less attractive. like i constantly explain to members of the cnbc investing club, price matters. and when a stock price goes up the risk-reward becomes worse. okay? valuation makes it more volatile. you made money. which is what we're after. but you can't let that prejudice you in favor of any particular stock. just like blackjack the cards have no memory, people. while your stock may have gone up when the market was roaring, that doesn't have much bearing on where it goes tomorrow, does it? the second reason you get tough on your portfolio during a rally is that you can figure out which ones to sell and sell hard. i tell you to sell on the strength all the time but i recognize this idea is totally contrary to human nature. in a rally everyone else is buying like crazy.

you feel great about your stocks and you certainly don't want to sell. but you have to. because there's no better time to sell than during a major short-term move higher. oh, and by the way, this selling doctrine applies to everything, even mutual funds. if you have gigantic short-term gains it's okay to ring the register on some of them. i like that. again, we all know this is true on some level. we know buy low, sell high but that's hard to execute in the moment. you have to know. because the facts have borne it out for years. even as no one likes being told to sell a winning stock into a smoking hot rally. so how do you fight your instincts? how do you get to a place you can sell inn. spite your emotions? simple. just like you said before you get tough on your portfolio, reevaluate your stocks and demand a lot more from them than you normally would. especially since they're more expensive than they were the day before, because they went up. i've got a very specific way of grading my stocks since my hedge fund days. every week i rank the stocks in my charitable trust.

which you can follow along by joining the cnbc investing club. i rank them from 1 to 4. 1s are stocks you'd buy at current price. 2s are stocks you'd buy if they pulled back. 3s are stocks you'd sell at a higher price. and 4s are stocks let's say you don't want to take any action on without more information, period. and when it comes to this ranking system a rally has a way of simplified things. prices are um, so the former ones, stocks worth buying at their current price, suddenly become 2s, stocks only worth buying on a pullback, because most things will have gotten too expensive. about thor keep your powder dry, wait for a sell-off down the road before you do any more buying. meanwhile a lot of your 3s, stocks you wanted to sell on the strength, become 4s, stocks you don't want to take any action on without more information. this is just a preliminary approach to what you should sell on a short-term rally. i'm going to give you more details later in the show. the reason we rank our stocks like this is to keep our emotions in check. we understand that we're frail. okay? so we buy low and we sell high. instead of buying high just because it feels good at that moment. most people for reasons we don't have time to go into now at

least really enjoy buying stocks but see selling them as a defeat. but ringing the register's not a defeat when you're getting top dollar prices during a juicy rally. first, though, you have to put yourself in the sell mode. and you start doing that by getting tough on your portfolio. bottom line, during a big up day and after don't get swept away by euphoria. okay? don't listen to the buy and hold doctrine that says it's not worth it if you actually -- book a little profit on some merchandise. because the whole point of owning stocks is that you're supposed to sell them when they go higher, to make money. if the fundamentals aren't changed, if the company hasn't improved, then it might have gotten tooexpensive as the stock because of the rally. so when the market's roaring, give your stocks a hard time, please, hold them to a higher standard and ring the darn register on some of the stuff both on the names you like the least and of course even the ones that are up the most. "mad money's" back after the break. >> announcer: coming up, want to

preserve those profits after a big rally? cramer's revealing the next chapter of his playbook and how to build the most important part of every investor's portfolio. next.

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and the support you need from your first day to graduation day and beyond. for over 75 years, umgc has helped people succeed again. what will your next success be? tonight we got into the "mad money" rally playbook teaching you the discipline that will let you take maximum advantage of a big up day. over and over again i've been telling you that short-term rallies are opportunities to -- >> sell sell sell! >> not buy. extolling the virtues of something that may sound really obvious but can be hard to put into practice because it runs counter it what our emotions say we should be doing when stocks are roaring. of course most people don't like to hear about selling stocks except when they're panicked and they think the whole world's falling apart. then they want to be given permission to sell. they want to sell everything. even though that's almost always

a mistake. generally most investors want to know about buying, especially what to buy. but you know what? you should have a plan for selling every single one of your stocks, even the best ones. and you should make that plan before you ever purchase them simply as part of the process. being a good investor means knowing when to get out and it's better to make those decisions beforehand rather than waiting until the heat of the moment. of course we want things to stay and never have to sell. but listen to me on this. stocks of good kbz can get too expensive. it happens all the time. and in big rallies stocks of bad companies also get too expensive. but it's easy to sell something when you know it's bad, isn't it? much harder to unload something you genuinely like for legitimate reasons. for example, 2021 we had a spectacular run in cloud-based software stocks. the low quality speculative stocks with no earnings and the high-quality established companies with great numbers, well, they all went up. and that includes many cramer faves like salesforce and service now. they got too hot. and you had to sell them into strength because after the fed

declared war on inflation the cloud software cohort spent the next 11 months getting mauled. the proper ones held up a lot better but their stocks still got eviscerated. and you could have -- if you simply rang the register on the way up. now, let me make this clear. selling into a rally is not solely about turning a profit then and there. obviously we're looking to buy low and sell high. so big up day or two gives you a great chance to sell. but the best reason to take some profits or cut your losses during a rally all boils down to what i talked about at the beginning of the show. preparation. let me explain. i believe you should be prepared for the bad days down the road. maybe because i'm a glass half empty kind of guy. except of course when i'm being a glass half full kind of guy. but mostly because the bad days are just as inevitable as the good ones. and what's the best time to get ready for these inevitable down

days? how about during or right after a big up day? that's the perfect moment to take something off the table, raise some cash. in other words, a short-term rally is your best opportunity to protect yourself from potential down side. trust me-u get the most mileage out of preparing for the worst days on the best days. don't get me wrong. that doesn't mean you should sell everything into any kind of strength. that would be self-defeating. it doesn't mean you should believe that all rallies are ephemeral and not to be trusted. there's an army of strategists and billionaire money managers and commentators who are constantly eager to convince you every up move is strerp or even illusory, alchemy. they want to scare you. i am not one of those. i know plenty of rallies have staying power and can take you higher and higher into jackie wilson style perhaps without that lat cain seeno event. you can believe in a rally and still use a big up day to take some profits, though. that's how you get ready for days in the future that likely won't be good. there's no cognitive dissonance here. we're just trying to balance the

concept of capital preservation, needing to keep your money secure, with capital appreciation. the need to grow your money. both of these are necessities. and they're not always mutually exclusive. you use a rally to take a profit so when the market comes back down you'll have cash on the sidelines, cash you can put to work buying stocks that have been suddenly put on sale. so in a way the rally playbook is really an extension -- more of a prologue to the sell-off playbook. we use the rally to stop how everything we'll need in case things get bad and one of those things is cash. glorious cash. yet while i'm a citizen of the united states i always pay my respects to the one true king, which is cash. plain old cash is probably the single most important part of your portfolio. most of the home gamers i talk to do not know this. i hear from people all the time who tell me they're fully invested meaning every dime of their money that's earmarked for investing is parked in stocks. and whenever someone tells me that they always think it's a good thing. cash, my friends, is what makes everything else possible. back at my old hedge fund i

would never have less than 5% of my portfolio in cash and i'd try to get it up to 10 if i could especially after a nice run. cash is flexibility. when the market pulls back giving you an opening to start a position in a stock you like or to buy more of one you already own you need to have some cash on the sidelines in order to do your buying. otherwise, you have to sell something you already own on the fly or use margin, meaning borrow from your broker, and that's something i never recommend doing. it's too risky. hey, speaking of margin, a big rally gives you the best opportunity to get off margin and start investing like a sane person rather than someone with a financial deathwish. what's this got to do with responding to a rally? while we'd like to have heavily invested with a little cash before the rally, trying to call one in advance is too difficult. but the best time to raise cash, which many of you absolutely must do if you're fully invested and the rest of you should want to do, is right after a giant move up. this is why we always have some cash on the sidelines at the charitable trust. here's how i think about it. your portfolio's cash position is like your car's gas tank.

if you don't have at least 5% cash you're running on empty and you'd better fill her up the next time you get a chance to. whenever you sell to raise cash, and we'll talk about that after the break, you'll get a much better deal after a rally. but listen, i'm not saying that rallies are a great time to go into all cash. not at all. i'm say i believe it's essential to raise some cash during or after a rally. emphasis on some. really. that's the goal. i don't care how much you like your stocks. not selling something to raise cash when the market's making it easy for you is downright reckless. with the charitable trust i've taken my cash position at times up to around 20%. when i sent too much euphoria. when the market eventually pulls back, put that swing cash back to work in stocks we like a lot more than the ones we previously sold. even so, the quality of companies you own isn't enough part of the equation here. it isn't even part of it, actually. it's the price of the stocks that matter. and some will get very extended in every rally. so trim them. you can buy them back later

lower. with the cash you raise from selling. that's the entire point. the next time things go sour you'll have that terrific pile of cash you've hoarded up during the rally. you'll feel great. you'll be able to buy into weakness. you won't feel hampered like so many who don't do this. this isn't about getting a great deal, people. it's about protecting yourself. bottom line, the next time you get a big up day or two, please, i'm begging you, use the strength to raise some cash. you might not know it, but without cash your portfolio has zero flexibility. and the best time to raise cash is when the market is on fire. let's go to dylan in virginia. dylan. >> caller: hello, mr. cramer. thank you for your time today. as a finance student i'd be grateful for any guidance you could offer students like myself as i prepare to enter the extremely competitive field of high finance. thanks so much for your advice. >> all right. work hard. work harder than everybody else. if you see everybody coming in at 7:00 come in at 6:00.

if you're there at 6:00 come in at 5:00. be the last person to leave. look around. if anyone else is still there, you stay later. that is what the bosses want to see. by the way, do some work while you're there. i don't want you playing solitaire. but work harder than everybody else. that's the secret. the work from home people? ron in south carolina. ron. >> caller: hey, jim. how are you doing, boss? >> i'm doing well, ron. how about you? >> caller: as best can be expected. hey, i'm 70 years old. i have two retirement accounts, roth and an i.r.a. rollover. >> okay. >> caller: a couple years ago i reduced my equities 100,000 in each account and bought treasuries. bought 30-day treasuries. and so my treasuries roll over every week. i buy one they pay me, i buy one, they pay me.

i was getting ready to start thinking about getting into a little more back into equities. >> okay. >> caller: but with all this hula going on between the fed and everybody's individual opinion i'm kind of a little bit on the edge. what advice can you give me? >> okay, ron, you are like many people in this position which is you kind of believe you're earning so much money in your cash, why should you risk being in stocks? here's what you're going to do. you're going to wait till a down 7% to 10% move before you take off a quarter of your cash and put it in the market. unless you get that decline i don't want you to do anything. stay where you are. let's go to linda in illinois. linda. >> caller: hello. boo-yah, jim! >> boo-yah, linda. what's going on? >> caller: hey. it's so wonderful to talk to you. listen, i affectionately call you mr. magic money maker.

>> that's high praise. >> caller: listen, thank you for your wisdom. and this is my question. i'm a retired postal employee who worked for 45 years. i have no financial investment knowledge. i wanted to know how do i buy stocks and i wantedto ask you should i try to invest my savings plan money in s&p index fund or magnificent seven or nvidia or all nvidia? >> first of all, you're sweet to trust me. i do want you to start with your first $10,000 in an index fund. you'll buy it this following way. you will put -- if you can, put a couple hundred dollars to work each month. i don't want it in all at once. okay? if the market drops extensively, big, more than 10%, i want you to take the month you would have bought two months from now and put it to work with that current month. that's how you're going to get

the best basis. stick by that discipline and don't go any faster. and then i am confident you'll get good prices and not feel like somehow you got hurt. i love nvidia. not the right method of diversification. when you're facing a big up day, here's what i want you to do. i want you to use the strength to raise a little cash. you might not know but without cash your portfolio has zero flexibility. and the best time to raise cash is when the market is on fire, not when it's going lower. there's much more "mad money" ahead. you probably think it's good when your portfolio outperforms even on a big rally day. well, guess what? you'd be wrong. don't worry, i'm explaining why. plus i'm taking all your burning market questions with my investing club colleague jeff marks. so stay with cramer!

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with this season's hottest accessory. -[ cellphone vibrates ] -oh, what's this? she's opening her fidelity app... to buy that stock... for exactly the amount she wants... no fees or commissions... what will gina do next? gina has roller derby at 6:00 pm. i'm there. get started investing for as little as $1. talk about easier investing. you're watching the "mad money" rally playbook, where i'm teaching you the best ways to take advantage of a market that's up big over a short period of time. remember, that's crucial. just a spike. all right? if you're just tuning in i'm deeply wounded by the cold shoulder you gave me when you willfully chose not to watch me or at least watch most of the show? i know you did it as a callous and sadistic attempt to hurt my feelings. congratulations. it worked. i hope you're happy.

back to business. most of my rally playbook about how to benefit from higher stock prices. how you can use a rally to set up for the inevitable rough patches that the market runs into sooner or later by raising cash. and which stocks you should sell in order to do it. the last part of my rally playbook is a little different. it's not about what you can do during or right after a rally, which we've already covered. instead i want to highlight what a major move higher can teach you about your portfolio because rallies are incredibly illuminating. i'm not too worried about anyone seriously underperforming the averages on a big up day because that's something you can easily study and fix by getting more exposure to the sectors that were up the most. no, what shouldn't get you truly concerned is watching your stocks dramatically outperform the average, dramatically outperform. that's the keyword. in marketwide value. you heard me right. making too much money on a given day can be a problem. or at least a red flag, a situation where your gains are trying to warn you about something. it's very countar intuitive but

bear with me. the warning's very simple. when your portfolio leaves the averages in the dust on a day when the market's roaring it means you're taking on way too much risk with your portfolio. i know i don't strike many of you as the most conservative investor around. i get that. and the fact i do this show every day even though it probably doubles my odds of a heart condition doesn't help my case. but taking on unnecessary risk in your portfolio makes absolutely no sense. and watching how your stocks move in a marketwide rally is a terrific way to figure out if perhaps you're taking on needless risk. say that a rally comes and you make much more than the averages. the question is why? were you using margin, borrowing money from your broker to get that extra bit of leverage? that will help you crush the average in a rally but will also get you crushed by your losses in a sell-off. that's just not wrgt it, people. what else could cause you why portfolio to dramatically outperform the benchmarks in a rally? it could be because you're not dirsified enough. that's a way to make boatloads of money in a short time frame. let's say the rally is led by

tech and your portfolio is 50% tech. you'd be a big winner, right? for a day or two. but those games are ephemeral. they won't last. not only that but the outsize profits are a huge warning screaming at you to sell your darn tech positions, maybe trim them back at least and call me up and play am i diversified. if you're not diversified if you're keeping all your stock eggs in onebasket then you could get wiped up in a heartbeat. just ask all the investors who loaded up on cloud software stocks or electric vehicle plays before they peaked in november 2021. those people then got blown out. the whole business. they just got out with massive losses. they couldn't take it. they were all beating the stuffing out of the benchmarks in late 2020 and the bulk of 2021. they were making too much money. that's right. too much money. just like tech investors before the dotcom bubble burst in 2000. if they pay attention to this rule, something we remind you of constantly if you happen to be a member of the cnbc investing club, then they might have been able to avoid the damage from the hideous tech losses in 2022. they could have adjusted their holdings and lightened up on

their biggest winners so that no single sector made up more than 20% of the portfolio. so let me give you the bottom line here. the best time to figure out if you're making too much money, meaning you're taking on a dangerous amount of risk, is during a big marketwide rally. use these runs as diagnostic tests to see if your portfolio has too little diversification and too much risk. or if it's a-ok. "mad money" will be right back. >> coming up, have a fear of missing out? cramer's giving you his guidebook on how to keep those emotions in check after a big run for the market. next.

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like i've been saying all night, you may not think you need your -- need help at all when the market seems to be lev levitating. but in reality, you probably do. when stocks go up, especially when they're up big, people get emotional. and emotions make us bad investors, period. always does. that's why the "mad money" rally playbook is all about. helping you combat your intuitive emotional reactions so

you can make sound rational decisions. by the way, we teach this discipline, same discipline, in more detail to members of the cnbc investing club every single day as we manage the charitable trust. remember, when you catch a big up day that's a selling opportunity. all right? when you want to use it to unload some of your best performers along with your laggards and the stocks you wanted to get rid of anyway, all so you can raise some cash for a rainy day. that's the most important thing to keep in mind after a major move higher. which brings me to my final rally rule. at a moment when raising cash is essential spending cash is absolutely prohibited. after a big one-day move i know you're going to be tempted to buy some stocks the next day. i know this. big up days make us more bullish. investors love to chase rallies the same way dogs like to chase cars. when your last experience in the market was having practically all your stocks produce huge gains, of course you're going to feel like buying but that's another case where your feelings stray from good investing.

do not buy stocks ever at the averages have just spiked. don't chase. be smarter than a dog. i want you to take advantage of rallies. but when you buy stocks the day after, the ones -- the day after that just got marked up big, you're letting the rally take advantage of you. i know you're doing this too. i read it on x former twitter @jimcramer every day after a big rally. that's when people are most excited, that's when they want to open their wallets and start chasing stocks. don't do it. i know this sounds like common sense, something any clown can figure out say nothing of cramer fave bozo. but i don't waste your time on the show. of course you know it's silly to buy the day after i arally or after stocks just had a huge run. you know it right up until the moment when you get swept away by your euphoria, which is a mistake we all make. including yours truly. that's why you need a playbook, you need rules to prevent yourself from getting swept away and making mistakes that you're obviously going to regret later on. so please, if you want to buy a stock and the market's just had a remarkable run, do me a favor

and tell yourself you missed it. just say darn it, i missed it, and take a pass. or at the very least keep your bat on your shoulder and wait for a better pitch at a cheaper price. it's the smartest thing you can do in that situation, and it could save you a lot of pain down the road. here's the bottom line. i always tell you to buy into weakness and sell into strength. but that really means you need to sell some of your winners at the moment when they're at their hottest. and you probably shouldn't buy anything when the market feels like it's on fire. if you do your new stock picks will likely be consumed in the aftermath of that fire. and you want to watch this show for all that hard-won money that went up in smoke. stick with cramer.

clem's not a morning person. or a...people person. but he is an "i can solve this in 4 different ways" person. you need clem. clem needs benefits. work with principal so we can help you with a plan that's right for him. let our expertise round out yours.

you've heard me explain to you how to protect and play your portfolio in a bull market. i love to maech my viewers but i also love learning from them, which is why i always say my favorite part of the show is taking questions directly from you. tonight i'm joined by jeff marks, my portfolio analyst and yes, partner in crime at the cnbc investing club. and we're going to answer some of your burning questions. we'll also give you a little inside look at what we do at the club. if you're not a member of the club you can just scan the code or go to cnbc.com/investingclub to sign p up. i hope you do.

let's take our first question. jeff. all right. first up we've got -- oh. when do you recommend investing in an ipo? now, this one, jeff, i'm going to let you handle because there's nothing harder. >> yeah, look, i think if you can get in on the deal that's always preferred. right? but if you are trying to invest in a new ipo just make sure that the valuation isn't completely out of whack with some other companies in its peer group. one more consideration, lockup's always something to be mindful of. when a company becomes public, oftentimes the employees of the company, the major shareholders, they are restricted from selling stock. once they become unrestricted, sometimes they'll unload their shares right away. that could create pressure on the stock. so just be mindful of lock-ups because if you're a little bit patient it may lead to a better price. >> you have to understand that i get very enthusiastic and jeff has to check on me. all the time what happens is some of these ipos are so exciting. but that should never dictate why you buy something.

excitement doesn't count. next up, andy in california says "hi, jim, can you please explain how investors should view gaap or non-gaap earnings he?" very complicated. suffice it to say i like what are known as traditionally generally accepted accounting principle numbers. in other words, i don't want to hear fancy ways to make earnings when there is a traditional way that i learned it in accounting and you learned too. >> sure. >> let's not fool around. >> gaap is gold standard. i mean, at times it is helpful to look at non-gaap because they'll exclude some one-time items that maybe doesn't give you a great apples to apples comparison of earnings. but sometimes we know management teams, they like to take a very liberal view of those non-gaap earnings. so you have to be careful sometimes around that. >> and we don't share the notion of liberal view. there are so many companies out there that have straightforward accounting. why reach to someone that doesn't? and i want to go to todd in minnesota who says, "concerning when to buy, doesn't only buy slash adding to a stock when

it's below basis dogmatically ensure we miss all momentum runs and only participate in downturns? i missed out on huge runs in the fall because i had to add to partial position." this is an art, not a science, sir. and what ends up is yes, we're going to miss some. that's absolutely true. you but we care more about the down side. if we stop the down side, if we protect against the down side, the up side is going to take care of itself. it is painful for me sometimes. and we've talked many times about -- >> of course. >> -- how we refuse to violate basis. this is something we fight every day tooth and nail. but the fact is we have proven evidence we've saved more money than we would have made. >> i like to apply a strict interpretation when you're just putting a position on over those first couple weeks, maybe months, only because you never know what curveball the market may throw at you. in that case just being a little bit patient saves you. but in terms of when to violate, well, if you've been owning the

stock for a while and you've had a lot of good news come, it's just a better company from where you first started buying it. that could cut towards -- >> great way of looking at it. i know there will be situations that are missed. but you just heard why we have to stick to your discipline. next up we have a question from karen in new york, who asks, "how do we find the rsi and is it a reliable indicator for making investment decisions?" the relative strength index. i do like to look at it, but i'm not wedded to it. and we can find it in various different places. i don't know. i tend to just look at the chart myself. >> look, you can find it on your trading platform. keep in mind rsi could signal when a stock may be overbought or oversold, but overbought doesn't necessarily mean sell and oversold doesn't necessarily always mean buy. at the end of the day the fundamentals are what matter most and if a stock is oversold for a long time it could signal something is fundamentally wrong. >> very true.

and we're looking for entry point. it's a tool again. but what i find most important about entry point is whether i'm buying expensively or less expensively. and as far as i'm concerned rsi, it's just another arrow in the quiver but not the most important one. i like to say there's always a bull market somewhere and i promise to try to find it just for you right here on "mad money." i'm jim cramer. see you next time. 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." ♪♪ and i'm beatrice. and our business is called zoom. the three of us met in college, actually, in our first design class, and it was kind of love at first sight, and we've been together ever since. at school, we came up with an awesome business idea based on high style and impeccable design. people think you have to spend a lot of money to get a good design, but that's so not the case.