>> who knew? >> these guys knew. >> we knew. >> to be surprised that she can caulk is not a nice thing to be. i'm capable of caulking. >> i believe it. >> ah -- selloff in abbvie is over overdone, for watching. "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 homework and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." people want to make friends, i'm trying to make a little money. my job is not just to entertain but to teach me. in a bull market, there's nothing worse than watching the averages roar higher while your portfolio sits there barely moving. it makes you feel like a cleat dope, doesn't it?

like the stock market must be some show game. it means you might be making a few basic mistakes. tonight, devoting the whole show to the play book. not to be confused with a bear market rally which is a bogus term people throw around the stocks go up when they think they should be going down. yep, 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 due fus needs to make money in a rally. what's next? potty training. should i just start reading picture books to children? hey, we got a animal sound effects. reading rainbow has been off the air for more than a decade. maybe you feel that's the same level of difficulty as making money when the stock market is on fire? who needs help when the dow is up hundreds of points in a day or even better during a multi-day rally.

a real run, a buy fest. you need my advice to help you deal with huge profits? no, i'm not buying into that bigly small series of investing mo money mo problems. how to approach a quick run the right way can make you a better investor. tonight, i want to show you some of the discipline. everybody makes money in a big rally and feel like you're running your portfolio is running itself. i'm not here to talk about how to make the most money possible when the market is up big. honestly, not that crucial. no. 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 pass you by. sell. that's right. just as we can't give into despair when the market is down, you certainly don't want to give into euphoria and buy, buy, buy when the market is roaring. that's not when you should buy.

it's when you should be taking chips off the table. remember, you don't 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 the best and worse of times has proven to be foolish. with only very few exceptions. you need to lighten up on stocks of companies with deteriorating fundamentals. that's why do your stockholmwork. how else will you know what to unload. if you don't want to do it yourself, you can join our club the cnbc investing club. we do the homework for you and with you. why is it to hard to sell on strength. good question. nobody wants to miss a rally. you sold every stock before a huge jump day, you feel like a stooge. let's look at it another way. say you're in stocks for the rally and have massive gains but you don't do anything, let them ride and gradually they come back down. if you let your gains ride until

they evaporate, how is that any 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 feel a rally a day or few days where your portfolio went up and nothing more. you need to see it as a time to take action. even if you don't fancy yourself a trader around 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 remember the good days during the selloffs to keep yourself in the game, you need to remember the down tas when the market is 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 hauls as an investor not a trader. i'm talking about doing some trimming. be 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, the post covid meltdown in 2022. not many wanted to sell in 2021. it looked great. buying dips made you a fortune. fed declared war on inflation and those gains disappeared. you sold on the way up, you were in much better shape as the market spent the next 11 months just getting obliterated. there's nothing wrong with feeling good about a rally. someone with some violent mood swings reach for that cheap scotch, lying on the dirty linoleum floor can tell you. euphoria is fine as long as it doesn't lead to complacency. complacency is your nemesis. you can be thrilled on a big up day. you're getting terrific opportunity to lighten up on the stocks. it's easy to be swept away by the positivity. market is up, 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 stock. in theory we're supposed to buy low and sell high. in practice, that's a lot harder than it sounds. this is why you constantly teach you to sell under strength when you join the club. we do it all the time on the travel trust. we peel it off. you're watching the gains roll in and feel like selling stock would be the most insane thing in the world because what happens when the rally keeps going. doesn't matter. we sell under strength. we also never sell all at once, that time timing is less of an issue. take some off. the rally holds up, sell more later. the name of the game is preparation. no real way to prepare for a rally other than by owning stocks, use a rally to prepare yourself for potential down days in the future. little counterintuitive but it works. best time to adjust your portfolio is when stocks are going higher. in the going lower, think of 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 you can

sell part of a position to take advantage of higher prices. remember, we never, ever buy or sell all at once. that's not my style. in the rest of the show i'll go through the whole mad money rally play book and explain what to sell, how to sell it and why you're selling it. but right now, here is the bottom line, when the stock markets had a big short-term run, short term, don't get carried away by the optimism. keep your head on straight. check your emotion. 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, please. michael? >> caller: hey, jim. boo ya. 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. >> i think that's terrific.

that's terrific. >> caller: i'm looking to do what do i do short term, high growth and what do i do long term dividends? >> okay. okay. now michael, i have to tell you, i'm 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'll live long. all the longevity agrees with me on this. i think you should buy dividends stocks. not move into cash. a great way to protect yourself. pick ones that are 4, 5% and i think you'll do very well. and you do it yourself. i know you can build this. steve in kansas, please. steve? >> caller: boo ya, jim. how are you doing? >> i'm doing well, steve. how about you? >> caller: i'm great. thank you for taking my call. >> sure. >> caller: jim, by the way, andy reid says number 3 this year. >> i love andy reid. what can i say. coach reid is the best.

tammy reid sun believable. 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 60/40 split growth value. been growth all of my life for the most part. what is your opinion about staying withthat type of split, 60/40? >> it's funny, steve. it's right in my wheelhouse. i would not do a thing. i think you were doing it right. i was afraid you were saying i'm thinking of switching 20 bonds. i like your position. you're betting with your life, not against your life. that's what i teach people to do. when the stock market had a

big short-term run, please don't carried away by your optimism. keep your head on straight, focus on long-term and think about ringing the register, especially on the stocks that might be getting too high. i know you own some. i'll give you everything you need to know on market rallies with my "mad money" rally play book. 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. @jim cramer on x. have a question? #madmentions, send an email to madmoney @cnbc.com. or give us a call 1800743 cnbc. leo! he's there when we wake up, he's there when we leave, he's there whenever we come back home from school,

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♪ people always want help when the market sells off. they want me to tell them what to do. to validate their fears. when stocks get hammered, investors freak out, they panic or at least they -- want to panic, i think that's right. i mean, 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 this industry, i can't recall a single time when someone has come up and asked, jim, the market is rallying like crazy. what the heck do we do? hey, that's unfortunate. because just as you need a play book to deal declines like i just mentioned, you also need a rally play book, a guide that tells you what to do when the market is having a big short-term run, not selloff but run. another wisdom is nobody wants to help with rally.

you need to reject that idea that people only need help when the market is lousy. all kinds of mistakes you can make when the stocks are going higher. in fact, the rally play book might be more important than the selloff play book. only because so few people think they need one. here is my first rule for handling a rally, always be really, really, really tough on your portfolio not just on the big down days but the big up days. only time you should be harder on the stocks you own on the midst of a brutal decline, no end in sight, need to circle the wagons. dump everything you aren't thrilled to own. that's a worst case scenario. how exactly do you get tough on your portfolio? you need to give every one of your stocks the harshest possible evaluation. assume everything you own is guilty until proven innocent. emphasize the downside. make each and every company you own prove to you it's worth

holding all over again. if this strikes you as silly or unfair to your fabulous stocks, allow me to explain, please. good day or 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 petd. 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 shouldn't give your stocks too much credit for making money unless they dramatically outperform the rest of the market. even then you need to give your stocks a hard time. when a stock makes you a fortune, 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 stocks get more expensive when they go higher. during a major market wide rally, unless serious value enhancing good news, your stocks

become pricier and less desi desirable. for example, no matter how much you like microsoft the company, and i do, microsoft the stock is a lot 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. i constantly explain to the members of the cnbc investor club, stock matters. the price goes up, it becomes riskier. you make money which is what we're after. but you can't let that prejudice you in any particular stock. blackjack, the cards have no memory, people. while your stocks 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 to get tough on your portfolio during a rally is 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 the idea is contrary to human nature. rally, everyone else is buying like crazy. you feel great about your

stocks. 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, by the way, this selling doctrine applies to everything even mutual rale fund. gigantic short-term gains, it's okay to ring the register on some of them. i like that. again, we 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, though. because the facts have born it out for years, even as nobody likes being told to sell a winning stock into a smoky hot rally. how do you fight your instincts? how do you get to a place to sell in spite of your motion. simple. like i said before you get tough on your portfolio. re-evaluate your stocks and demand a lot more from them than you normally would especially since they're more expensive than the day before because they went up. i have a specific way i grade my stocks. i rank the stocks in my trust which you can follow along with by joining the cnbc insvesting club. i rank them one to four.

ones buy at current price. twos buy if they pulled back. threes are stocks you sell at a higher price. and fours are stocks let's say you don't want to take any action on without further information. period. a rally has a way of simplifying things. prices are up, stocks worth buying at the current price suddenly become twos. stocks only wort buying on pullback. get this? better to keep powder dry. wait for a selloff down the road before you do any more buying. meanwhile, lot of 3s, stocks you wanted to sell on the strength become 4s, stocks you don't want to take any action without more information. this is just a preliminary approach to what you should sell on a short-term rally. more details later in the show. keep our emotions in check. we understand we're frail, okay. so we buy low and 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 selling them as a defeat. but ringing the register is 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 want to buy -- book a little profit on merchandise because the whole point of owning stocks is you're supposed to sell them when they go higher to make money. if the fundamentals aren't changed, the company hasn't improved and might have gotten too expens market is roaring, ring the darn register on some of the stuff both the names you like the least and of course even the ones that are up the most. "mad money" is back after the break. >> announcer: coming up, want to preserve those profits after a big rally? cramer is revealing the next

chapter of his play book and how to build the most important part of every investor's portfolio -- next.

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anyone can trade in any phone, any condition and get iphone 16 pro with apple intelligence, on us. for everyone in the family. only on verizon. ♪ teach you the disciplines of what you take maximum advantage of a big up day. over and over again i've been telling you that short-term rallies are an opportunities to -- >> sell, sell, sell. >> -- not buy. it can be hard to put into practice because it runs counter to what our emotions say we should be doing when stocks are roaring. most people don't like to hear about selling stocks except when they're panicked and they think the whole world is falling apart. then they want to be given permission 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 is knowing when to get out, better to make the decisions beforehand rather than the heat of the moment. we want things to stay and never have to sell. listen to me on this. stocks of good companies can get too expensive. it happens all the time. in a big rally, stocks of bad companies also get too expensive. it's easy to sell something when you know it's bad. much harder to unload something that you like for legitimate reasons. 2021 the group got too expensive. established companies with great numbers all went up. that includes many cramer favs like salesforce. they got too hot and had to sell them in a strength. after the fed declared war on

inflation, they left the next 11 months getting mauled. the proper ones held up better but their stocks still got eviscerated. and you could have sidestepped much of that pain 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 a glass half full kind of guy. 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, and raise cash. in order, a short-term rally is your best opportunity to protect yourself from potential downside. trust me, you 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 under 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 commentators constantly eager to convince you s tempora. they want to scare you. i am not one of those. i know that plenty of rallies of staying power and can take you higher and higher. you can believe in a rally and still use a big update to take profits. that's how you get ready for the days in the future that likely won't be good. there's no cognitive dissidence here. we're just trying to balance the concept of capital preservation,

the need to keep money secure and capital appreciation. you need to grow your money. both are pure necessities and notalways mutually exclusive. you use a rally to take a profit. you'll have cash on the sidelines, cash to put to work buying stocks that have been suddenly put on sale. so in a way it's an extension rally more of a prologue to the selloff play book. 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. plato cash is probably the most single most important part of your portfolio. most don't know this. i hear people tell me they're fully invested. every dime of their money earmarked in investing is parked in stocks. when ever someone tells me that, they think it's a good thing. cash, my friend, is what makes everything else possible. henl fund i would never have

less than 5% in cash and try to get up to 10. if i could. cash is flexibility. the market pulls back an opening to start a position in a stock you like or buy one of 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. never do that. it's too risky. rally, start investing like a sane person rather than someone with a financial death wish. while we like to be 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 must do if you're fully invested and rest should do is right after a giant move up. this is why we always have some cash on the sidelines. here is how i think of it. your portfolio is who your gas tank.

you don't have at least 5% cash, you're running on empty and better fill her up. when you sell to raise cash, you'll get a much better deal after a rally. listen, i'm not saying that rallies are a great time to go into all cash. not at all. i'm saying i believe it's essential to raise some cash during or after rally. interest on some. really, that's the goal. i don't care how much you like stocks, not selling something to raise cash when the market is making it easy for you is down right reckless. i have taken my cash position up to around 20% when i sense too much euphoria. when the market pulled back, put that swing cash back to work in stocks we liked a lot more than the one wes previously sold. even so the quality of companies you own isn't enough part of the equation. it isn't 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. next time things go sour, you'll have that terrific pile of cash you horded up during the rally. you'll feel great. you can buy into weakness. you won't feel hampered. this isn't about getting a great deal, it's about protecting yourself. bottom line the next time we 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 0 flexibility. and the best time to raise cash is when the market is on fire. let's go to dillen in virginia. dillen? >> caller: thank you for your time today. >> of course. >> i've been grateful for any guidance to offer students of myself as i enter the treejsly competitive field of high finance. thanks for your your advice. >> work hard. work harder than everyone else. come in at 6. working at 6, come in at 5. be the last person to leave.

i don't care what. be the last person. look around. if anyone else is still there, you stay later. that is what the bosses want to see. work harder than everybody else. that's the secret. work from home people. ron in south carolina. ron? >> caller: 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 ira rollover. >> okay. >> caller: 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, pay me. i buy one. they pay me.

so, i was getting ready start thinking of getting into little more back into equities. but with all this hoola going on between the fed and everybody's individual opinion, i'm kind of little bit on the edge. what kind of advice can you give me? >> ron, you are like many people in this position which is that you kind of believe that you're earning so much money in your cash, why should you risk of going into stocks? >> unless you get that decline, 10%, i don't want you to do anything. stay where you are. linda in illinois. linda? >> caller: hello. boo ya, jim. >> boo ya, linda. what's going on. >> caller: so wonderful to talk to you. i affectionately call you mr. magic moneymaker.

>> that's high praise. >> caller: thank you for your wisdom. 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 wanted to ask you should i try to invest my thrift savings plan money in s&p index funds or magnificent seven or nvidia or all nvidia? >> 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'll put -- if you can, put a couple hundred dollars to work each month. i don't want it in all at once. 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 pace. stick by that discipline and

don't go any faster. then i'm 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 is what i want you to do, use the strength to raise a little cash. you might not know it, without cash your portfolio has 0 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 enon big rally day. guess what, you would be wrong. don't worry. i'm explaining why and taking all your burning market questions with my investing club colleague jeff marks. so stay with cramer. ♪

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♪ you're watching the "mad money" rally play book. where i'm teaching you the best ways to take advantage of a market that's up big over short period of time. 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. hope you're happy.

it worked. most of the rally play book is what you to benefit from higher stock prices. how you can use the rally to set up the inevitable rough patches that the market runs into sooner or later by raising cash and which stocks you should do in order to do it. the last part is different. it's not about what you can do or right after a rally, which we covered. instead, i want to highlight what a major move higher can teach you about your portfolio. rallies are incredibly illuminating. i'm not too worried about anyone seriously underperforming the averages on a big up day. that's something you can study and fix. no, what should get you truly concerned is watching your stocks dramatically outperform the average. 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 counterintuitive. the warning is simple.

when your portfolio lees the average in a dust on a day when the market is worry, too much risk with your portfolio. i don't strike many of you as most conservative investor around. i get that. the fact i do this show everyday even though it doubles my odds of a heart condition doesn't help my case. but take you unnecessary risk on your portfolio makes no sense. watching how your stocks move in a market wide rally is terrific way to figure out if perhaps you're taking on needless rick. say the rally comes and you make much more than the average. 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 selloff. that's not worth it, people. whatelse could cause your portfolio to dramatically outperform? it could be because you're not diversified enough. way to make boat loads in money in a short time frame. the rally is led by tech and

portfolio is 50% tech. you would be a big winner for day or two. those gains are ephemeral. they won't last. the outsized profits are a huge warning screaming at you to sell your darn tech positions. maybe trim them back at least or call me up and play my diversified. if you're not diversified, then you can get wiped out in a heart beat. just ask all the investors who loaded up on cloud software stocks before they peeked in november of 2021. they were blown out. they got out with massive losses. they couldn't take it. they were making too much money. that's right. too much money. just like tech investors before the dot com bubble burst in 2000. remind you if you're a member of the cnbc insisting club, they may have been able to avoid the losses in 2022. lightened up on the biggest

winners so no single sector made up more than 20% of the portfolio. the best time to figure out if you're making too much money, taking a dangerous amount of risk is during a big market wide 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-okay. "mad money" will be right back. >> announcer: coming up, have a fear of missing out? cramer is giving you his guide book 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 help at all when the market seems to be lev tating, 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 play book is all about. helping you combat your intuitive emotional reactions so you can make sound, rational

decisions. by the way, we teach safe discipline more detail to members of the cnbc investing club every single day. catch big up day, that's a selling opportunity, all right? you want to unload some of your best performer and stocks you wanted to get rid of any way to raise cash for a rainy day. that's the most important thing to keep in mind after major move higher. brings me to my final rally rule. moment when raising cash is essential, spending cash is prohibited. after big one day move, i know you'll be tempted to buy 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. last experience was having all your stocks produce big gains. you'll feel like buying. but that's another case where your feelings are leading you astray from good investing.

don't chase. be smarter than a dog. take advantage of rallies. when you buy stocks the day after the ones -- the day after they were marked up big, you're letting the rally take advantage of you. i know you're doing this, too. i read it on x, formerly twitter after every big rally when people are most excited. when they want to open their wallets and start chasing stocks. don't do it. i know this sound like common sense. something any clown can figure out. say nothing of cramer fav bow sow. i don't waste your time on the show. it's silly to buy after stocks had a huge run. you know it right up to the moment you get swept away by your euphoria which is a mistake we all make. including yours truly. that's why you need a play book. so please, if you want to buy a stock and the market just had 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, wait for a cheaper price or better pitch. it can save you a lot of pain down the road. here is the bottom line, i tell you to buy under weakness and sell under strength. that 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 will be consumed in the aftermath of the fire. stick with cramer. ♪

it all started with a small business idea. it's a pillow with a speaker in it! that's right craig. pulling in the perfect team to get the job done. i'm just here for the internets. at&t, it's super-fast! you locked us out?! and when thrown a curveball... arrggghh! ahhhh! [crashing sounds] we had everything we needed. is the internet out? don't worry, we have at&t internet back-up. the next level network for small business. ♪♪ i sold a pillow!

you heard me explain to you how to protect and play your portfolio in a bull market. i love to teach my viewers but i also love learning from them. my favorite part of the show is taking questions from you. tonight i'm joined by jeff marks my portfolio analyst and partner in crime, the cnbc investing club. we're going to answer some of your burning questions and give you inside look what we do with the club. scan the code or go to cnbc.com/investingclub.

first question. >> first up, we got when do you recommend investing in an ipo? now this one, jeff, i'll let you handle because there's nothing harder. >> 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, lockups always something to be mindful of. when a company becomes public, oftentimes the employees of the company, the major shareholders are restricted from selling stock. once they become unrestricted, sometimes they'll unload their shares right away to create pressure on the stock. just be mindful of lockups because if you're a little patient, that may lead to a better price. >> you have to understand that i get very enthusiastic and jeff is the 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. hi, jim. can you please explain how investors should view gaap versus non-gaap earnings? i like generally ak abseptembered accounting principle numbers. i don't want to hear fancy ways to make earnings when there is a traditional way that i learned in accounting and you learned, too. >> sure. >> let's not fuel around. >> gaap is gold standards. it is helpful to look at non-gaap. exclude one-time items that doesn't give you great apples to apples compareson of earnings. management teams like to take a very liberal view of those non-gaap earnings. you have to be careful sometimes around that. >> right. we don't share the notion of liberal view. so many companies have straight-forward accounting. i want to go the todd in minnesota who asked. doesn't only buying slash adding

to a stock when it's below basis ensure we miss all momentum runs and downturns? this is an art not a science, sir. and what happens, todd, is that we end up, yes, we're going to miss some. that's absolutely true. but we care more about the downside. we stop the downside, protect against the downside, the upside is going to take care of itself. it is painful for me sometimes. we talked many times about how we refuse to violate basis. this is something we fight everyday tooth and nail, but the fact is we have proven evidence that we saved more money than we would have make. >> i like to apply a strict interpretation when you're just putting a position on other those first couple weeks, maybe months only because you never know what curve ball the market may throw at you and in that case, just being 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, well, then it's a better company from where you first started buying it. so that could cut towards violating. >> great way to look at it. i know that there will be situations that are missed, but you just heard why we have to stick to our discipline. next up, we have a question from karen in new york. who asks, how do we find the rsi and is it reliable indicator for making investment decisions. i do like to look at it but i'm not wedded to it. we can find it various different places. i don't know. i tend to look at the chart myself. >> yeah. look, you can find it on your trading platform. keep in mind, rsi it can 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 can signal that something is fundamentally wrong. >> very true. >> we're looking for entry point. it's a tool.

again, what i find most important about entry point is whether i'm buying expensively or less expensively. rsi, as far as i'm concerned, it's just another arrow in the quiver but not the most important one. there's always a bull market somewhere. i'm jim cramer on "mad money." see you next time. ♪inds me of w >> tonight baseball legend and prolific investor, alex rodriguez returns to the tank tiers i love your story and it's inspiring to reminds me of when i grow up. -- this is a basic question in investing. there's no money in it. vegas: before we jump into the valuation, do you guys want to drinsom. yes. ♪♪