To keep me from losing big money when things went badly. The rules im discussing tonight keep you in the game en when thingng are tough and you make those mistakes. E rules protect againstst your own bad judgment. If youre going to make money using stocks because you just cant get much of return anywhere else these days, thats pretty much the case, youre doing to have to w wk h hder with your money to do so. And that requires discipline. Discipline because once you start buying and selling stocks, you can make more mistakes than if you just do nothing with your money. If you do nothing with your money, you have a whole lot of nothing to show for it. Thats why were doing a s sw on how to trade and invest responsibly to make your money work for you. How to tend it, how to make it grow, what kind of gardners of money tonight, how to keep it growing from active money its a sin and a lot of you practice it. I want you to do it right. Before we dig into the ways to make your money grow by being hands on about it, i want to delve into a little psychology of stock ownership. One question im asking repeatedly, i go back and forth from the street, to squawk on the street andd wall street or they ask me at jim cramer on twitter is, dont you worry about your stocks . Now, it is true, i dont own any dividual s scks i invest just fofo charity with all profits and dichbs given away to chartble causes. But believe me, i still worry as i wantt to be able to give as much money to charity as i can. Plus i disclose everything i own and tellou explain w`at im going to do before i do is part of it. You bet i have concern. I can be down right embarrassing when i get it wrong. Yep, im always worried about the trust stocks espspially when im definitely worried when they go down when the market as a whole is going up, thats a sign to me that something is wrong, someone knowsws somethingng that i dont know i better find out or i wont be able to take advantage of the weakness. Thats the chief reason why im alwaysys bugging you a aut reading the news releases, the guidance and going to the web sites for more information. You cant be informed if you dont try to inform yoursese. Ii know thatt those who dont know what they own and cant articulate what they own and dont know what Company Makes or sale know whyhy it will be going down either, they dont know whether to buy or sell into a big sell off. Were talking about psychology here. The psychology of the mind when all that homework doesnt pan out. Believe me, it is frustrating. When we select a stock on the show the highlight we do a mass amount of work on it every single time. Go down, but there are plenty of times when there is, say, something you cant detect, theres plenty of times when theres popping byy management and you dont know by the truth. I talk about press releases that make things sound much better than they are. Who wants to start by saying were pleased to that sales increased by 12 . It sounds good accept the analysts were looking for 20 . Th that 12 youve got a hideous shortfall, or worse than that kind of puck ri, when you own a stock and someone out there knows the truth and you dont, maybe someone found out about them playing golf with executive, maybe some hedge funds played under the table to get the truth as weve time and time foror yearsnd years. Even some ended up in jail for doing it. The insiders had the call, you didnt. There araralso tops of time when you simply own too much stock, we call this being too long. You are too long as a presentationals say, you cant buy any more stock on the way down youre so out of capital, or worse, or borrowing money to finance your portfolio, which i think is just a terrible ideaea stocksksrent houses, you cant fall back and live them if you have a mortgage on them, they just get taken away by the margin nerds. So what do you do, how do you manage a portfolio under conditions where things go wrong with the stocks you own all thehe timemend things go wrong in the market all the time, wholly a part of whats going on at the end of the dual companies in which you own shares. There are no magic bullets b b i believe when in doubt, this one principle is key, discipline trumps conviction. Memorize that term, discipline trumps convicicon. I staired at a yellow post it with those words for many years when i was managing money professionally to remind myself that things go wrong and you need to have a schemeeo help you deal with those situations when things go wrong as they evidentblely do. Yes, i put a discipline trumps conviction sign on my personal computer to remind me what to do in the stock market when things go wrong. One of my best forms of protection to recognize if yourereot tough and you like all of your equally, you cant be flexible. You cant change up when things go wrong, thats bad, people. Thats why ive come up with a system of ranking my stocks whehe things are good and times are plateauing and these are hedges against yourself for when things get tough. You know, when its really calm out there, you can do good not all stocks are created equal, you circle the wagon, rust like a wagon train going out west in the 18 hundreds around a good few stocks, buy them down to get a better basis or avrng price. Why does this matter so much . We must expect corrections and declines as a matter of court. We must anticipate the days where we wake up and hear the good people saying the futures are down, theyre down a great dede and thehe market looks to open down a half a percent or a down a percent, youve heard that so many times. Wevee learned so much over the years about which triggers corrececon on that too. The most important thing to have a game plan you know even when youve done all the homework discipline dictates you must assume theres something you dont know going on with individual stocks or that theres something happening in the world thats beyond the corol of your acumen and my ranking system will get you through the chaotic, when all others fumbling and fretting and desiting they cant take it any more and have toet out of dodge at the exact worst time. Here is the bottom line, in order to be able to deal with the decline in your stocks or the stock market as whwhe, you have to accept that something is wrong at the companies you own shares in that you might not know about or maybe theres something happening in the stock market you didnt foresee. Therefore you must be ready with a game plan that can bell you out short termo that your money works for you and not against you at a timehen you needs it most. Frank in new york. Jim, i understand why a Company Goes Public to raise capital for various difference reasons, why would a company want to go private . This is a great question. They want because they think its worth a lot more than what the s sck market is paying for it. When that is typically because the owners of the company, the managers recognize, theres so much value and the stockholders and buyers know. Ey take it private, make it look better and they tend to bring it public again. Ann in california, please, ann. I havent seen any perspective onpock splits lately, im curious when theyre dpoipg to split their stock . Companies tend to be very close to us to divest about it. When you split it you get two pipies two foror one split for the same company it doesnt create any wealth at all. It happens to be exciting, when stocks do split, some of the smaller invest stores get a a chchce to buy. All right, that they didnt have otherwise, so i am prosplit but does it not create any wealth and you cant determine when it will happen. Discipline isnt but but it is necessary when you want to make big money in e market. You always have a a game plan ready. Ill help you out on mad money tonight, there are trees and there are investments il explain why understanding the difference will save you from a world from hurt. Whe. Plus a correction is always working around thehe corner, ill help you protect yourself when so stick with cramer. Karl, dont you have friends coming over . Yeah, so . Ittinks in here. Youve got to wash this whole room are you kidding . Wasasit . Lets wash it with febreze. For all the things you cant wash, use. Febreze fabric refresher whoa hey mrs. Webber inhales hey, it smells nice in here and try pluggable febreze. To continuously eliminate odors for. Up to 45 days of freshness pluggable febreze and fabric refresher. [inhale exhale mnemonic]. Tonight were going over the rules. The rules make it so loss`rules th keep you in the gam when others are freaking out. Used to talk about these rules all the time so they became Second Nature to me. That was years ago now, when i think about it its usually in the response to a tweet that the rules answer. Thats why i kind of dust them off and maybe sure people im not ducking the questions im looking g r a better formatat to flesh them out than 140 characters where i cant be thoughtful. I wan to be thoughtful, but it hard. Here is a typical question, some will mention the stock, theyll ask, what do i do now . I often then turn the table on the persoso asking why did you buy in the first place . The followers regard that as arrogant or flip. What im really trying to do is figure out if they bought it as an investment, which means it might be fine for them in a longer time horizon and they should buy more or if they do it for a traz and perhaps they should cut their losses, why does this matter, because one of my cardinal rules is to never turn a trade into an investment. If theres one concept to take away, never ever turn a trade into something that it wasnt meant to be, a longterm investment. Lets talk about the process of buying a stock, the actual check data you must do before you pull the trigger. Whenen i decide im going to buy an oil driller, i have to declare, right up front to myself whether i am buying it for a trade or for an investment, whats the difference . A trade means im buying it because of the specific catalyst, the reason that will drive it higher, recommendation, a belief that things are better than expected or some news that we always talk about, break up into several pieces or some occur. In other words theres a moment to pull the trigger, a moment to buy. Perhaps because you think that oil is abouto spike because of shutdodo because of spigot in russia or some problems in the middle east and then theres a moment when the event occurs and yourep done. You must declare first before you bu here is y, the vast majority of you will buy a stock for a reason, neither the reason occurs nothing happens to the stock, you decide, ill got it investment, i wont wont worry about it or perhaps never the reason never occurs and you decide to hold on to whats the worst thing t tt can happen, the answer almost plenty. The answer you would have never bought it in the first place if you didnt think the reason is going to occur, theres no reason for you to own it in the firstlace. Ive seen a myriad of invest stores turn trades into investments to full themselves theyre doing the right thing thats because they dont make the distinction between a trade and invevement. Its the reason why i bought the oil company at Higher Oil Prices does it materialize, i cant say hold on to it because it has a swell dividend. The only thing that would have saved that from being cut Higher Oil Prices without them the idea for the trade is going into the dividend, now, when i want to invest in a company, not trade, invest in a company i buy a small amount of it to start and hope the market will knock down the stoto so i then buy moror at a better price, thats right, i actually when i invest want the correction, which is always the way you want to be thinking if youre tryingg to start a newew you dont want to buy investment stock. But, theres nothing like a nationwide market wide sell to get you better prices on y yr buy, trading is the opposite. I put the maximum on at the beginning because i believe the data point or the event is about to occur. I never buy anything for a trade without that defined catalyst thats the word we use. I never buy anything for a trade hoping it will go higher it can be no hope in the equation of buying a stock. I buyown lower prices when im investing. I cut my losses immediately when i am trading. Its the reason im trading the stock doesnt pan out. Thats w w i like to say that my first loss can be my best loss. If you buy a stock for trade and it starts going against you in a meaningful way, decline of0 cents is meanful, you may have a real problem on your hand. When it comes to trading im a disciplined person to the penny. I like to cut my losses quickly thats why i say my first loss is my best loss. All other losses tend to be lower levels. Again, people, anyone watchihi, to feel the trade going arye but because of eco, pig headedness, they dont want to heed the thunder and they stay in, onlyy to let the panic out at lower levels when the catalyst doesnt occur and the whole reason to own the darn stock evaporates. Dont fool yourself, cut your losses quickly when you put a trade on and it starts to go arye. Sure, theres an occasion or two when its about to pan out,ut r the most part itt does and youre probably going to be wrong, just a fact of life. Come pen yum of all the studies ive made, the bottom line never turn a trade into investment, take the loss, because believe me the percentages say youll so do it earlier rather than later. Because it is the latter that can wipe it all out. Theres much more mad money ahead. Chasing doesnt always have a happy ending. Corrections are certain, dont miss my take on to how to prepare yourself for the inevitable. Plus its easy to get attention for your hold, holding on too long can burn you in theend. Ill let you know when to stuck the cord. Stick with cramer. Your clever moves wont stop the cold and flu. But disinfecting with lysol can. Because lysol wipes s d spray are approved to kill more types of germs than clorox. Including those that can make you sick. For a healthy home this cold and flu season. Lysol that. I take pictures of sunrises, but with my back pain i couldnt sleep and get up in time. Then i found aleve pm. Aleve pm is the only one to combine a safe sleep aid plus the 12 hour pain relieving strength of aleve. Im back. Aleve pm for a better am. Were all familiar with this, axe daily fragrances. But what you wouldnt ve seen is this, axe e y spray antiperspirant. Why are you touching your armpit . I was just checking to see if its dry. Dont, thats weird. The first ever dry spray antiperspirant from axe. Kelloggs frosted miniwheats. 8 layers of wheat. And one thats sweet. For the adult and kid in all of us. Kelloggs frosteteminiwheats feed your inner kidult covergirl is the easy way to draw attention perfect poinliner smudge with spongetip to create a smsmin kitten eye lash blast mascara adds an instant blast of volume add a pow to your brow wow from easy, breezy, beautiful we e e going over the rules that have gotten me at this point where in my career where i can play for charity instead of treading in my own hedge fund which i retired from. The lessons are very much with me and im going over them tonight in this special show to help you in your portfolio. If it werent for that darn buy of, i would have been up big, i will be making a huge amount of money in the market if only i hadnt let blank lets use fire eye run against me when there was all that Insider Selling darn it, all. It makes one or two losers to i try to devote far more of my time analyzing loser stocks than my winners not because of a streak, rather, i recognize that stocks often telegraph decline ahead of time, loss control is power amount concern for all those in the market because the winners, the good stucks, they take care of themselves. Take the loss before it gets hideous. Dont buy into the notion that you cant sell until it comes back and then you promise not t itagain. How many times have i heard that one . Thats how losers think. You need to think like a winner not a loser. You want one o o my answer focus on twitter youre obviously un unfocused. The flip side is true too, you dont have a profit. Listen to me, you do not have a profit until you sell the stock and nail it down. Its not a profit, people cotantlyonfuse bigig gains, real gains you can take to the bank or, of course, get yourself a cashmere sweater in the Nice Department store with phony paper gains they can be taken away in a heartbeat. Most people were also reluctant to ever book a profit they dont want to pay taxes. I alws tell people if i can just rewind the tape to january of 2000 or july of 2007 when people were sitting on literally trillions of dollars in unrealized gains because they didnt want to pay the tax man, we will be able to drill this point home well enough people will respect. Gains not taken can be losses that will be taken. Gains taken never become losses, its that simple. I stress thihi point because we have all been brainwashed not to sell. Somehow we think its simple. Its trading, whoa, its common sense cal to sell, its logical to sell it may be the only way to get rich in a choppy business, but its just counter to human nature. When it comes to stock human nature, i this i think youve got to learn to count. Its hard to resist. I cant tell you how many times ive had my heart in my throat pounding, poundingg because i didnt own enough stock in a rising market. I didnt have enough exposure. I cant tell you how often i felt that i had to play. I hado be big in stocks because the market was going higher and it was going higher without me. Do you know that every time i had at feeling, that instinct almost every time i had that i cant miss this action dro ma playing around in my head, do you know what happened, thats right, i lost money. Disappointed is the most important rule of w wning and investing. Its teaching. Sometimes that discipline means admitting you missed the oppottunity and it is already too late. I almost always feel like i missed something right near the when i was a hedge fund manager, i turned that sentiment boo a profof center b b betting against myself in the market when i thought i was missing the upside. That heart stuck in the throat feeling core lated with the tops of moves not theottom ones. I made money saying theres that pain again, sell. I always remember its the best time to buy when it feels most awful not when it would relieve the pain of fearing youre going to miss the big rally. You must protect yourself against over trading, trust me, ere arent me great ideas to act on. The real great guys dont have that many ideas. You have to think about when youre proned to this. For instance, want to go on twitter, i i always amamad how people want me to opine a stock that just reported they want me to do it in one headline alone. I find that business wires that report these numbers are almost wrong in the q qck takeaways business is a lot more harder than complicated than the press release. Headlines have presented stories about such and such number being better than expected arere the type of d the reality is that theres something else, some other metric that might be more imyortant thats manufactured withne time gainsns that happens all the time. I think you have to read the whole story and listen to the conference call, which part is the portion before the q and a when they lays out its guiuince that moment, and not what the head