Buzzoo

Jim Cramer is quite a character. To me he is a tad too loud. But I guess his character brings life to his Mad Money show. Cramer does come with a wealth of knowledge from his many years as hedge fund manager.

He has some noticeable failure rate, though. Some people, in turn, actually invest by doing exactly the opposite of what he says.

I do not usually watch his show, I only watch it as I land on his show when I flip through the channels on a rare free time. However, I was not able to sleep a few nights ago. He was on TV, and he covered something that to me was very valuable. I’d go so far to writing them down

How to Invest like a Pro.

1. Never be fully invested, always keep some cash on the side. If you have 5% of cash or less, consider yourself fully invested. You need to have 10%, Cramer said. Only invest this money when the market is down significantly, 10% or more.

I would absolutely concur about this. A few days ago, Dow hits it’s all time high, as we enter an upbeat earning season. I was quite bullish, and I invested all I have. As for today, Dow was 600+ points off of it’s highs. Had I kept some cash on the side, I could have gotten some stocks in a much cheaper prices.

2. Always think of the potential downside. Whenever someone picks a stock, he/she always thinks of the potential upside. However, very few are thinking about the potential downside. This is particullarly true for a very volatile stock.

I am an amateur. . Mea Culpa

3. A man has got to know his own limitation. Only invest on companies that you know really well, in an industry that you are familiar with.

On this one, I think I am doing quite good. I don’t invest in many stocks. I invest in a few that I really really really know.

4. Worry if you make too much money too quickly. According to him, this is a sign that your portfolio risk characteristic is not balanced. A special care needs to be taken so that this gain is not lost, and further losses can be avoided.

I think this is a valid suggestion. It’s not that you don’t welcome the unexpected gain, but you need to be able to explain it. If it is unexplainable, then it’s probably time for profit taking, because the price increase is not supported. Take the gain before it’s all gone.
5. Never ever buy or sell stocks on an earning season. It’s simply just too difficult, it’s just like gambling. Wait until the earing has passed, and then jump in on the good news. Hold until the next quarters. A good quarter is an indication of more good quarters.

Well, I am (almost) fully invested now because of the earning season. Fortunately tonight aapl earning was really really good (up 67% than last year!!!!). But I’d agree with him that I have seen good stocks, including appl, that tanks after a good earning report.

Alright guys, happy investing like a pro.

This entry was posted on Monday, October 22nd, 2007 at 9:25 pm and is filed under Announcement, Guides. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.