>> i am jim kramer and welcome 20 my world. >> you need to get into the game. >> they're nuts. they're nuts. they know nothing. >> i always like to say there is a bull market somewhere. >> mad money, you can't afford to miss it. >> i am kramer. welcome to mad money. i am trying to save you money. call me. in recent years stocks have become more hated, hated than any time i can remember my entire career, spans a lot of time. i still believe anyone can turn a profit in the stock market. as long as you're willing to put in the time and effort to keep track of what you own. i wouldn't come on out here every night to educate you if i didn't think it was theoretically possible but

actually feasible for the vast majority of people to succeed at managing their own money. so okay. so if that's the case, then why is this investing so darn difficult? how come so many people struggle to make money in the stock market? how can i believe it's possible for you to beat the averages, the big benchmarks like the s&p 500, dow jones average, and mutual fund managers so regularly fail to do so? simple, you can do it. but you have to do it the right way. one of the biggest obstacles is in successful investing is a lack of clarity about just what investing is supposed to mean. i have seen countless people try to follow the conventional wisdom about money management only to have their investments wiped out because the conventional wisdom is wrong. and the worst part is, those people had no idea they were making a mistake. they actually thought they were being responsible. in other words, to borrow a phrase from "cool hand luke."

>> what we've got here is failure to communicate. >> i am shaking, boss. >> that's why tonight i want to demystify the concept of long-term investing. an idea that's been misinterpreted so often in so many ways that it's become more of a hindrance than a help for most investors. listen up, tonight, set you straight. here on "mad money," we're actually about long-term investing often mischaracterized. we're about long-term investing. there's a serious problem with this notion that goes like this. too often people let the concept get in the way of investing. if you think long-term investing is about making boat loads of money over years even lifetimes, i'm onboard, and that's something we can do that allowed me to make money at my hedge fund. however, there's a darker side to this concept. all too often i've seen people invoke long-term investing as an excuse, an alibi either for poor performance --

>> the house of pain. >> or for not paying attention to what they own. you often hear you shouldn't worry about your losses or the profits you're missing in the present, it's okay to take short-term pain because you'll make back the money with long-term gains. sometimes, absolutely true. but most of the time, losing money month after month after month or year after year, that isn't a good recipe over the longer term horizon, but a bunch of short-term losses don't transform into long-term gains if you wait long enough. simmer and boil here. yes, making money over the long haul is the ultimate goal in this game. but it's also become the ultimate excuse, the alibi for short-term losses. and believe me, that kind of thinking will only make you a worse investor, no the a better one. before i can teach you how to invest for the long-term, i've got to disabuse you of the long-term alibis you've been fed for ages and still are today. where do these sirens of long-term investing lead you astray? at what points do you need to cover your ears and tie yourself to the mast?

so that you won't listen to the conventional wisdom and end up steering your portfolio on to the rocks? first and most important, long-term investing is not the same as simply owning stocks for a long time. in other words, don't confuse being a good investor with the idiotic ideology of buy and hold or as i dub it buy and forget. buy and hold has been the conventional wisdom for decades and this one bad idea has lost people more money than the last two financial crisis combined but it's defended in the media by everyone. just because you have a long-term horizon it doesn't mean you can take loss after loss after loss in the short-term and just because they're unrealized, believe me, that doesn't make them into gainers or potential gainers. losses are losses. realized or otherwise. and the notion of being in something for the long-term doesn't justify owning damaged goods. the stocks of companies that are in bad shape in the misguided hook they'll recover, damaged goods. the idea behind buy and hold, once you purchase your stocks, you just wait.

me, i've never liked waiting and also happens to be a terrible strategy. that's why i'm saying we have to keep track of your investments. you've got to do that ridiculous, hard, i know time-consuming homework that isn't ridiculous and it's not that hard. its not that time consuming. but it's what i tell you about all the time. the quarterly report, the sec filings, the conference calls, reading transcripts -- much of the research that used to be available only in those paying millions in commissions, now found on the web like yahoo finance and everything. cnbc.com. the street. they all got it. it's your money, invest your time in it. the advocates of buy and hold means you have a license not to pay attention to the short-term. it's like a birthright, that allows me not to do homework. but you always have to pay attention. the moment you stop is the moment you start losing money. that's why people under perform. you'll never be able to recover from those losses until you get engaged with your portfolio again. and you're not stupid, you can get engaged and you can do this. now, sometimes companies go into

what's known as secular decline. and their stocks never really recover. in that case, you can't afford to wait for a turn around. you just have to get out before the damage becomes too horrific. yes, polaroid, kodak. okay? how about research in motion? nokia? how about radio shack, right? that was a good one, or super value, all the way down we were told that long-term you're fine. or in other words, being a long-term investor doesn't give you a license to be lazy or apathetic investor. ask anyone who owned stocks through the misery and horror of the crash in 2008 and the beginning of 2009 knows, it doesn't work. investing for the long-term does not mean owning stocks forever no matter the cost. if there's one thing the crash did disabused people from just keeping stocks. and magically somehow the bank of america comes back to 50. as long as you don't pay that much attention or gain short-term losers, i get it. from the stories i read, from pundits, the lessons are already being forgotten. i can't have that happen, not on my "mad money" watch.

i've been one of the loudest opponents of buy and hold, and in this new age of meltdowns, many fools have tried to change their tune or they've been discredited that no one listens to them anymore. still others know. it doesn't mean you should write off the idea of long-term investing too. doesn't mean stocks can't make you money over an extended period of time. although that's what many of you think -- might think if you confused long-term investing with buy and hold investing. buy and hold was always bogus, but the truth is stocks are still the best way to make money for your retirement, 529 plan to send your kids to college or build up a savings so you can afford house, a car, vacation. especially stocks with consistently growing dividends that allow you to compound your wealth by reinvesting the kind of dividend payers i highlight in "getting back to even." that said, you'll never get any of those things if you use the concept of long-term horizon as an excuse for bad performance and holding stocks that can't afford to pay their debts let alone their dividends. sometimes something you won't even know about if you just buy and forget because you feel it's

a license not to have to find out about it. here's the bottom line, long-term investing has gotten mixed up with bad ideas over the years, that doesn't mean it's not worth trying. i can teach you the disciplines and strategies that will allow you to build long-term wealth just as long as you remember that saying, hey, come on, i'm a long-term investor is no excuse for not doing the homework or following the rules. if anything, being in stocks for the long-term requires more diligence and more patience than if you're in there for the short-term. so don't throw away all the lessons that i teach you. you're going to need them. to paraphrase that fabulous poetic amateur investor gertrude stein a loss is a loss is a loss unrealized or otherwise and don't you forget it. bill in florida. bill? >> caller: yes, jim, nice to talk to you. >> same. >> caller: hey, jim, i'm a retiree and on fixed income. i'm concerned about the future. so much uncertainty, jim, there's uncertainty in taxes, uncertainty in the elections. >> right. >> caller: inflation is a big

concern of mine. is there anything i can do at my age to protect myself from all these uncertainties coming up? >> well, look, i've got to tell you. you're a person who really does have to heed 20% in gld or gold bullion, that's going to be your best defense. i think the defense is absolutely right to have. i'm not going to tell you you should buy bonds that's going to yield 2%. i think gold is going to be the best defense you have against the worries that you just outlined. let's go to anthony in virginia, please. anthony? >> caller: washington redskins, boo-yah, rg3 nation stand up. >> dan snyder's your owner. have you thought about at all? >> caller: i've got a quick question. >> yeah. sure. >> caller: if the market is overbought, should i stand on the sidelines or look to get in long-term? >> when it's overbought, my own rule, i use the s&p oscillator delivered to me on saturdays. my own rule, if we're very overbought, take a pass, another time will come.

however, you can get started small and hope it comes back if you can't resist. sam in ohio. sam? >> caller: hey, jim, big boo-yah to ya. >> loving it. what's up? >> caller: hey, i got a question. i've been looking at a couple utility stocks and looking at going with preferred instead of the common shares. just wanted your opinion on what's -- maybe what might be better -- >> no, come on, man, we want up side. we don't want to cap our up side. a lot of utilities should be fabulous growth particularly in a growth economy. let's own them outright. we'll do just fine. of course i want you in the market for the long run. the whole idea of trading back -- you can't beat the high frequency traders, give me a break. i want long-term investing, but that does not mean buy and forget. even when you intend to hold a stock for the long haul, do not throw out the rules. keep doing the homework, be sure you're in the right merchandise and stay with cramer. energy, economy, employment,

hot-button issues plaguing america. but the key to one state's prosperity, cnbc takes you to ohio where the energy boom explodes with jobs, manufacturing and overdrive and the battleground for votes is pivotal. jim's in the buckeye state where they're bucking the trend. it's a special edition of "mad money," invest in america reports begin thursday in "squawk box" on cnbc. ♪

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let's talk the price is right. not the game show. i am talking about the stocks. do you want to actually make money from your stocks? it is critical you buy at the right price. that's true whether you're making a short-term trade, purchasing, something if everything goes right you expect to hold for years and years. the price still matters. you make it vastly more difficult to rack up the big gains you and i want. the ones we can't get enough of here on "mad money." if you get the price wrong, might not make any money at all. i think price is dramatically underrated as a determinant of successful investing, which is why tonight i'm giving the power of price it's due. how do you find the best price to pull the trigger given how important i think it is? when you're investing for the long haul, you have one huge advantage over people who are using a shorter term horizon. a resource that traders don't have the luxury of exploiting. i'm talking about time.

as a longer term investor, you've got all the time in the world. now, when you want to buy a stock because you like the underlying company's prospects and when there are no newer catalysts that can drive the price up any time soon, that's a recipe for being patient. you don't have to pay the price the market's giving you at that very moment, right? you can be patient and wait for the stock to come down to your price before you do this. of course, you're never going to get an all clear signal it's time to buy, you're not going to hear this and say, oh, i know. how exactly are you supposed to know how long you should wait before you pull that trigger? simple, don't know. this is one of those areas you've got to embrace the facts of ignorance. that's why i tell you to buy your stock in increments. loading up gently and over time because we're all ignorant in the end. we don't know when a stock or the market is going to give us the time. let's bet we're going to get the wrong one at first if you buy all one level and e stock goes down further, you're going to feel like an idiot for losing money so quickly. most likely you'll get

frustrated and dump the whole position a point or two down instead of using the weakness to buy more. i studied thousands of trades, this was one of the most common problems. there is no right price, but if you build up your position, patiently picking up more shares over weeks and months, you can avoid paying the wrong price. and that's more important. that's why back at my old hedge fund and my charitable trust, you can follow along actionalertsplus.com, because i play with an open hand. i like to buy wide scales on the way down. authentic wall street gibberish, let me translate into cramerica interest. wide scales on the way down describes the way you should purchase a declining stock or a stock you're afraid's going to go down while it approaches a bottom. you want the right entry point for your long-term investment and this is the way to do it without getting discouraged. i am trying to stop human nature here. now it's practically impossible to call perfect bottom of an individual stock. that's why we don't try to time the bottom by buying all at

once, the odds of being wrong are way too high. instead, the smart move, the way the pros do it and you should do it is buy on the way down. and the guys believe it. you know the stock's really done going down and you want to be all in because you're so sure you're getting in on the ground floor. in this game, you've got to presume there's a basement. if not several subbasements, okay? this notion is scaling into a position is a trick that helps you get around the difficulty of timing the market exactly. it is a trick. it's a little -- it's just something that i've used over time, just give me better prices. let's say you want to buy 400 shares of caterpillar, say it's trading at 90. you buy all four at once, then you know what? it trades down to 85. you're going to feel like a stooge. not larry, not moe, not curley. and worse, you'll have lost two grand practically in the blink of an eye. that's why we don't do that. if you want 400 shares, start small, buy 100 shares at $90, then you wait for a pullback, then if cat comes down to $85, rather than contemplating suicide, you're thrilled to have a better entry point to buy

another 100 shares came to you at a lower price. you buy the next 100 shares if cat drops to $81 and the final 100 if it sinks below 80. you know what? you've got a pretty good basis, basis matters, basis is price. worst-case scenario, caterpillar goes higher and you make more money. either way you don't have as many shares as you wanted. now, that's what i call a high-quality problem. similarly when you decide to sell a stock, you should unload it incrementally into strength. that way you won't have any regrets about, oh, boy, i sold it all and it had a big move. eliminate that thinking. you know about buying incremental. now let's talk about scales. if you're buying a stock that's sinking a little bit lower every day and that's okay because the company could be good. you can either buy it with strict scales or wide scales. what's the difference? let's stick with caterpillar as an example. you would buy say 1,000 shares every time the stock loses a point. each time cat goes lower, you buy more. that is the way institutions trade. the essence of strict scales you buy in the same increments, every time cat goes down a point or three points or whatever size

decline, you purchase the same amount of stock. using strict scales smart and responsible. sometimes i have a problem with it. that's why i like to use wide scales. especially a volatile cyclical stock. the trick of wide scales you buy larger and larger positions as the stock goes lower. you know what? i used to think of it as a pyramid of buying. if the stock lost a point, i would put on 1,000 shares, another point, 1,500, and when you sell it so low you can hardly believe it, you can double down. do you see what i mean? it's about a pyramid structure about buying the best investors i have ever seen all use pyramid style. they don't talk about it. the lower the stock goes, the larger your buys become. the great thing about wide scales, they leave you with more room to maneuver. when the stock bottoms out, you're going to want to pour your money in and it allows you to buy the greatest number of shares at the right price. the best term about long-term investing, you can afford to be patient. when you like a company's fundamentals, wait for a market wide pullback or a sector wide to gain a big position in that company's stock as it goes down.

make sure the story's still intact. that's why i say you have to do the homework. if the company is broken, then the stock's never going to be a bargain no matter how low it falls, which is why you've got homework. in that case, you might need to abandon ship. find a better to travel. there's no sin in recognizing you made a mistake and you have the wrong stock. the bottom line, in this game, few things are more important than price, trying to get a good basis, and as a long-term investor, you have the luxury of being able to wait for a good one. be patient, keep your bat on your shoulder, wait for the right pitch, and never buy at once. when you're trying to catch a stock on the way down, be sure to buy with wider scales to get the best possible overall wider basis. joe in massachusetts. joe? >> caller: hey, boo-yah, jim. i've got a quick question for you on stop loss orders versus stop limits and how an individual investor can best use that not only to minimize losses but to ride the ups and downs of an individual stock. >> well, look, i don't condone these. if you're going to own stocks and you're going to try to get the right prices, you've got to

stay on top of it. i'm sorry, it's too important, it's your money. you get one of these flash crashes, suddenly you bought a stock at $80, it's at $70 immediately. i can't condone that. the market doesn't work well enough to do those things anymore. it's too crazed. you've got to protect yourself from this market, from any market that acts as badly and as strangely because of high-frequency trading. those old tricks out the window. price matters, basis matters. don't buy all at once, don't sell all at once. keep an open mind, keep doing the homework and stay with cramer. you've done your homework, you're ready to buy, but how do you know when the time is right? >> yes, that is a monster stock. >> just ask cramer. >> making money, cramer. >> "mad money" weeknights on cnbc. 5-hour energy? 5-hour energy supports the avon foundation for women breast cancer crusade.

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that makes tv even better. if your tv were a prom queen, zeebox would be a limo. with this enchanting union, she'd had a sunroof, and a chauffeur to instruct. james! prom jackpot. download zeebox free, and have the night of your life with your tv. the only way to generate consistently strong returns year after year after year is by putting thought and effort into the process. anyone who says you can make money in stocks without keeping track of short-term developments at the underlying companies is like a personal trainer who promises you can get in shape without doing any exercise. here is a pill. that's what buy and hold is, it doesn't work. yet i think a substantial majority of the public still believes this buy and hold nonsense is the only legitimate way to invest. i read about it in the papers all the time. no wonder stocks are so hated. people have been convinced if

they buy blue chip stocks as if that term means anything anymore, and they just wait long enough, those stocks will work their way higher. that's some law of reverse gravitation they all subscribe to. it's been a lousy strategy if it's a strategy at all if you can even call it that. but in recent years, well, let's just say it's been really horrific. think about it. for the last -- for the five years, from the middle of 2007 to the middle of 2012, s&p 500 declined by 9%, things have gotten better over the last few years, but when you look at the performance over the first decade of the new millennium, s&p was down 24%. so you only did lose 9%, only 9% in those ten years when you factor in reinvested dividends. which is why, hey, i'm always telling you to own high-yielding dividend stocks. even factoring in dividends in 2000 through 2009, you were better off hiding money in your mattress than buying and holding stocks. the strategy didn't work. let me give you advice that could've spared you a great deal of pain on a subject you almost never hear from any of the

fraternal order of buy and hold. i want to talk about a forbidden term. some say it's a curse word, marks me, i want to talk about selling. selling. every stock you buy, you should consider comes with an expiration date. again, radical. knowing when to sell those stocks is every bit as important as knowing when to buy the stocks. in fact, it's more critical. because so many people make such a huge number of selling-related mistakes by panicking and selling in weakness or by getting greedy and not selling at all. no one ever talks about selling except for me. if you pick the right stocks, the ones with fabulous long-term stories and getting it at the right price and eventually you'll have some winners that will be up and up big. the trick at that point is not to go all in gordon gekko. greed is not good, man, it's dangerous, it's horrible. bulls make money, short sellers or bears can make money, but pigs, slaughtered, bacon. when you've got a serious

winner, even if you think it still has many years of gains left in it, hey? you know what? take some profit. period, no discussion. you can let some of them ride, but it's a mistake to let them all. you've got to ring the register on some, a partial portion or position. otherwise your winners could become losers and that's a huge sin. it's best to lock in profits while you still have them by selling incrementally into strength. believe me, you haven't won until you've taken something off the table. hey, i'm making a lot of money. don't use that term making unless you're profiting. ringing the register. why am i putting so much stress on the need to unload your best-performing stocks that you're supposed to let run and never touch. for starters, you don't need me to tell you to sell the losers. when you own a stock and the company lets you down. maybe the story isn't playing out as well as you expected. maybe management isn't executing, maybe the economy takes a turn for the worst and the stock belongs to a sector out of favor. don't get sentimental. don't give them the benefit of the doubt. you've got to sell.

better to act quickly, take a small loss and give a broken company a second chance to burn you and then take a much larger loss. often people hang on to losers because they're waiting for them to get back to even. it is the worst apple amateur mistake. doesn't matter if it's a loser. but even then, these people know their losers deserve to be sold. they want to sell, they're just waiting too long for an unrealistic price that's too high given the downturn with the actual company. selling your losers makes sense, selling your winners, that's counterintuitive for many of you. you have to trim your biggest gainers. the first reason is simple. diversification. when you let your winners ride, your positions can get too big. let's say you've owned a stock that's doubled and doubled and doubled. apple around $200, that represented 15% of your portfolio is now much a larger piece of the pie even if other stocks have gone up a decent amount. at that point you have too much exposure to the best stock and too much exposure to whatever stock that is in. you know my rules. you never want more than 20% of

your portfolio in any individual sector because keeping all your eggs in one basket is downright dopey. that's why you need to trim your winners as they go higher. so they don't become too large a piece of your portfolio and get you in trouble. i'm not saying sell them all. that is what's going to be interpreted as and it's not true. if you're investing for the long-term, you've got time to do this and you do it gradually, pieces, not all at once. as your winners go higher, you should sell off parts of your position. it's a scale out slowly over time. like i told you earlier, never sell all at once like you should never buy all at once and try to wait for moments of strengths. don't wait too long. you don't want your portfolio to become too heavily weighted toward any one group. there's one more concept to be aware of when you sell your best performers. and that's the idea of playing with the house's money, which i explained in "stay mad for life." you want to trim your position to the point -- this is your ultimate goal, not buy and hold, where all the money you have

invested in that stock comes from profits you've already made and not a penny comes from the original investment. once you pare back your winners, then you can afford to take more risks with what's left. that's the holy grail of investing because you can't lose. you're in a can't-lose position. you can ride it all, you won't never let it go. that's fine. that you can buy and hold. it's bought and paid for with the house's money. one last thing, younger investors can afford to let their gains run for longer. why is that? the fact is those of us older and closer to retirement cannot risk to turn big investment gains into losses. we don't have time. when you're young, it's less important to preserve your capital because you've got your whole working life. all those paychecks coming in. those of us in the older demographic, even if you're extraordinarily well-preserved, like myself, i mean who would guess i'm a limber 60 something? you've got to be more careful. that means trimming your winners more aggressively and ringing the register more regularly than a younger investor might. when you're investing for the long-term, you can't just hold stocks forever.

you have to remember to take profits, trim back your winners so your portfolio stays diversified. and when you can, try to take all of your invested capital out and play with the house's money. that's my ultimate goal. that's the only time i say you can buy and hold. nick in kansas. nick? >> caller: hey, jim. i was just wondering, should we embrace the increasing popularity of etfs as a way to mitigate market volatility? if so, which ones would you recommend? >> the only etf i'd recommend on the show is the gld. and why is that? because that's gold -- i want to own the best. etf gives me the opportunity to own the worst with the best. i think one thing i've learned is being able to pick which ones are better, which ones are worse. that's what i want you to do. i can teach you to do it. i know you'll do it. daniel in texas. daniel? >> caller: hey, jim, boo-yah to ya. >> i always want to do the show from baylor. what's up? >> caller: well, i was in a real money portfolio management class

and one of our key tools of trade with the p.e.g. ratio was to find the most valuable spots for the fund. i started looking towards the price, cash flow and free price the cash flow. do you think a price cash flow for -- >> i'll tell you -- look, i happen to like the p.e.g. ratio, but i look at myself when i analyze a company, i look at operating cash flow. that's the one thing that no one can really -- operating cash flow that is growing, to me and you're a student in business, so you know how to look for it is a great way to measure a company's worth and its future. all right. with apologies to gordon gekko, greed not good. you've got to lock in profits as stocks go up. you can't just hold stocks forever unless you're playing with the house's money. the best position to be in is when all that's left is the profit that the market's given to you. then you can let it run forever. stay with cramer.

energy, economy, employment, hot-button issues plaguing america. but the key to one state's prosperity, cnbc takes you to ohio. where the energy boom explodes with jobs. manufacturing's in overdrive and the battleground for votes is pivotal. jim's in the buckeye state where they're bucking the trend. it's a special edition of "mad money," invest in america. reports begin thursday in "squawk box" on cnbc.

keep up with kramer all day long. follow on twitter and hashtag your tweets. if you want to invest for the long-term. and like it or not, that means planning for your retirement. to misquote john maynard kaines, we all retire. trying to put together enough money to become financially independent is really what we do every night here on "mad money." now, look, i'm sure you've heard the basics a billion times. you have to contribute to your 401(k) plan if you have one and you have to contribute to your individual account or i.r.a. it's not exactly helpful. tonight instead of just telling you to park money in your i.r.a., i'm going to give you suggestions about what kind of stocks to buy with your retirement cash. first, though, you need to know why everyone tells you to fund your i.r.a., these are tax blessed vehicles, it comes from your pre-tax income and you don't pay taxes on the money you

contribute. even better, while your money stays in these accounts you pay no money on the taxes or your profits or no capital gains taxes. you only pay taxes on money when you withdraw it. then it taxes just the regular one. that's a sweet deal, especially if you're worried about tax rates or dividends and capital gains going higher, and they do fluctuate over time. they go up and down throughout my trading career. however, as much as i like the tax-favored status of 401(k) plans and i.r.a.s, something almost nobody else will come out and say, most companies' 401(k) plans stink. they got high management fees and administrative costs that eat into your returns and typically offer you lousy choices for your investments, not nearly enough control over them. the 401(k) business is to me sometimes a racket for the managers who get to charge you these large fees. i'm very upset about this but helpless to stop it.

ideally when you manage your own money, you want to diversify a portfolio of five to ten individual stocks, but most 401(k) plans don't let you do that. often let you choose from a limited menu from a couple dozen mutual funds with some stock funds, bond funds, the best you can normally do is find a decent low-cost index fund and put your 401(k) money in there. given that the whole premise of "mad money" is you can do better than an index fund by picking individual stocks and managing your portfolio on your own with your own time frame. that makes a 401(k) a pretty poorly designed vehicle. sometimes it feels like the whole 401(k) system was set up to benefit the financial services industry, not you. and given the way washington works, it wouldn't surprise me if that was the case. nevertheless, most 401(k) plans stink, you should still contribute to your 401(k) even if you put it in cash because you've got to take advantage of the tax blessed nature. these tax-favored vehicles are too good to pass up. plus many will match your contributions, i'm a big believer in not turning down free money. you should put enough money in your 401(k) to max out the company match, if you have one

and then stop. and then the rest of your investing should happen in your i.r.a. until you hit the upper limit of what you're about allowed the contribute. an i.r.a. gives you the freedom to invest your money any way you want. for 2012, the maximum contribution was $5,000, $6,000 over the age of 50. what should you buy in your i.r.a.? like i tell you getting back to even, your best bet here is to own many of the high-yielding stocks i talk about all the time on this show. that provide the protection and generate income. there are a couple of wrinkles that making investing in an i.r.a. different. for example, as much as we like high yielders, it doesn't really work well for master limited partnerships. think of pipeline stocks like kinder morgan, energy partners, mlps are already tax advantaged. considered a return of capital, which means you don't pay taxes on them until you sell the stock. there is this arcane rule interpreted toughly by the irs. i love this. but there's this arcane tax rule interpreted toughly by the

i.r.s., if you buy too many within an retirement account, you could end up giving up that tax-favored status, paying taxes if you wouldn't have paid if you bought them in a regular brokerage account. same way with trusts that own pools of mortgage-backed bonds. in general, we do tend, though, to have high yields and worth owning in your i.r.a. be careful of the mortgage reits. what i have to tell you, that's the group you want, but consult your tax professional about mlps and real estate investment trusts before you choose them otherwise we're going to go with the utilities and higher yielding telcos. beyond that, use the same metrics. looking for high yields, also has to be safe, meaning the company better have enough earnings to cover the payout. also a consistent track record of raising the dividends, that's great for capital gains that are tax protected. the bottom line, a huge part of long-term investing is retirement investing, and the best way to prepare for your retirement is by putting money in a tax-favored vehicle and investing in high-yielding dividend stocks. reinvest your dividends and let them compound year after year after year. without paying any taxes until you withdraw your money at tend. that's a terrific recipe for

producing huge long-term returns. david in california, david? >> caller: hi, jim, like your show. >> thank you, david. thank you for calling in. >> caller: you frequently comment about listening to conference calls, and i was just wondering you're probably at the institutional level. do the ordinary individual can gain access to these conference calls even in the listen-only mode to listen to the analyst questions as well as management's response? >> a lot of times they don't let you do that. it doesn't matter. you don't need it in realtime. you can always just go get the transcript. that's the way i do it. sometimes i like to do it in realtime, a lot of times i'm doing the show. i do the transcript on the way home. and the transcript's readily available everywhere and you can stop -- that's the most important thing, you can stop and think, and you can't do that while you're listening to it live. long-term investing involves not only an i.r.a., but high-yielding stocks, the right ones to put in. reinvest, build up over time, avoid the taxes by simply making

sure you make the contributions every year. stick with cramer. jim cramer, looking out for you. >> thank you, sir, for helping us average joes on the road for financial freedom. >> thanks all you do for us small investors. >> thank you for helping us home gamers. >> thank you for sharing your knowledge with the every man. >> i love doing it for you and any time anyone says that, i say thank you, it's great. >> anywhere, any time, any place. answering the call of cramerica, weeknights 6:00 and 11:00 eastern on cnbc. questions?

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here's a serious conundrum, how on earth are you supposed to pick stocks for the long haul when sectors are going in and out of style in the wall street fashion show? how do you buy something when in reality that's not the way the game has started to work anymore. there are very few stocks you can just keep on riding higher and higher. year after year, but when you find them, they are the holy grail of investing. and those don't go in and out of vogue, just with the fashion

show analogy. all right. like i told you before, there's no such thing as a stock you can own forever. that's the essence of the kind of buy and hold thinking that's lost so many people such huge sums of money over the years. but some winners are more lasting than others. and there's a certain type of stock that can produce incredible multi-year gains. and they can be owned for much longer than what i regard as ordinary stocks. i'm talking about what's known as secular growth stocks. that's a rare breed that you should always be on the lookout for. these companies are driven by powerful long-term stories that transcend the strength or weakness of the underlying economy. most companies need a healthy in order to thrive, we call that cyclical growth. but a true secular growth story can deliver fantastic numbers, even in a lousy economy. numbers so consistently good they can keep powering the stock higher quarter after quarter after quarter year after year after year regardless of the economic environment. how do you spot a general secular growth name? i like to look for big picture themes. a company on a much broader trend.

take the healthy eating in this country and embrace of natural and organic foods. this has made whole foods the go-to supermarket into a power house stock, also destroyed the regular supermarkets and the same thing goes for haines celestial, it's not your average consumer packaged goods company. however, while these stories can last for years, even secular growth trends in the end have a limited shelf life. and you see the theme's age, there are fewer and fewer plays that can make you money, last longer, but never just last forever. years ago, back when the smartphone was a relatively recent invention and most people were using dumb phones, i started talking about the power of the mobile internet tsunami, and for a while, there was a ton of money to be made over the smartphone food chain as people converted from dumb phone to smartphone. but the tsunami turned out to be the reason to buy best of breed players like apple. it turned out not to be a license to buy the weakest

players which gradually fell by the wayside as we learned. a rising tide does not lift all ships. the ones with holes in this sink even with great secular trends. here's the bottom line, most of the time you can hang on to a stock for years and years and years, but if you find a growth story that's been pushing ul a pretax whole foods or apple, then there's nothing wrong with owning them until the story stays intact. they're not going to be part of the wall street fashion show. it can be a very long time. but just like life, even secular growth stocks don't last forever. and while you may want to go for the greatest secular surf ride of all time, even the biggest wave ends up crashing on the shore. only homework will keep you from crashing along with it. larry in tennessee, please, larry? >> caller: is this james j. cramer? >> yes, it is, how are you? >> caller: great, man, i think i've read everything you wrote since 1998. i want to thank you for helping me put my daughter through

college and teaching us home gamers to survive on this stuff. >> you're terrific, thank you so much, thank you. >> caller: so i had a question, tax season's coming up and you teach us to trade around the core positions up and down. i wonder if you have any advice for us coping with wash sales. >> they're a problem and really, that's why what i'm going to do on that problem. i am going to tell people. i can't give individual tax advice, you've got to speak to your tax consultant about when you can take these sales and then go back and buy because you're absolutely right. there can be a wash sale problem. but i don't want to speak broadly about it because that's something that is individual to a person's tax consultant. no stock is forever. they come in and out of fashion all the time. but some do last longer than others. those are the secular growth stories we live for. they have a longer shelf life, and that's ultimately what we're trying to find. "mad money's" back after the break.

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all night i've been trying to walk you through what it does and doesn't mean to be a good long-term investor. so while we're on the subject, i got one last point to make. and it's this, there's nothing inherently virtuous about long-term investing. the notion of trading has become a loaded word. loaded with negativity. as if somehow in and out of stocks for short-term gains. i'm not here to make judgments, we're here to make money. i think picking long-term winners is more lucrative. i like it. but if you find your portfolio

does better when you're managing your money more actively, hey, meaning trading in and out of stocks more frequently, more power to you. i'm not going to judge you, although never forget, you do not have the horses to compete with the high-frequency bandits or the hedge funds with multi million dollar research budgets to support their operations, one of the reasons i prefer longer term investing. at the end of the day, the bank doesn't care if it was short-term trades or not. we've seen banks launder drug money from cartels, they're not going to draw the line at money you made from trading stocks. the teller, presuming you can find a human isn't going to say i can accept this deposit, but not that one, it's dirty money from trading. take it elsewhere. fact is, the only difference between trading and investing has to do with your time horizon. trades are ones you hold for weeks or months and investments are a plan for year, year and a half.

day trading's totally different. i can't encourage day trading, i think you'll lose money. don't be confused by trading and investing. you don't have to choose between passing and holding as an investor even if you feel you should be taking action. or flitting in and out of your holdings on a daily basis as a trader. look, you can do what you need to do to save money. find your own happy medium. no matter which path you choose or both, just be true to your disciplines, do your homework, stay on top of things, i think you'll do better than about any mutual fund etf or hedge fund you could have at your disposal. only those managing your money for themselves, in other words take your money and their minions, they're the only ones who would disagree with the statement that says you can do it better yourself. stick with cramer.

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