Wednesday, June 2, 2010

Pigs really do get slaughtered! So don't be one!

"Bulls make money, bears make money, pigs get slaughtered"
Jim Cramer - Mad Money

Yes, Jim Cramer can drive you nuts with his ranting and raving about stocks and investing. Sometimes he is right, sometimes he is wrong (just like the rest of us) but of all of his rantings, I sure like the quote "Bulls make money, bears make money, pigs get slaughtered". Jim drives home this simple thought every night on his CNBC show, Mad Money.

Jim's style can grate on serious investors and newbies alike, but one thing is for sure, he does try to enlighten the small retail investor and this quote is far and away, one of the best pieces of advice he gives every single night to his viewers. If you don't listen to this golden piece of advice, you stand to lose your shirt, and more.

If your investment strategy is to throw money on hot stocks and hope for a home run, then you should change the game. You are better suited to the game of craps at the local Casino. With that attitude, you may actually do better at the Casino, than in the market.

Economic forecasts are never certain. If you put three economists in the same room, you will end up with three entirely different opinions of where the economy, and by extension, the market is headed. Don't invest in stocks because of an economic forecast! Invest only when you have done your own home work on an individual stock, it's market niche, it's earnings/potential, it's management, it's trading range, and analysts opinions. (Actually we like stocks that are under the radar of analysts, but is for another post).

The bottom for traders is this!  If you have a stock that is up say 20% to 30% and you don't take at least "some" profit, then consider yourself a pig, and expect to get slaughtered. You don't have to sell because a stock is up, but taking "some" money off the table when you are up is simply a fact of good trading.

If as opposed to "trading" you consider yourself a long term investor and you are not concerned with short to medium term profits, you may still wish to "take some off the table". It just make sense because, as you've heard many times, "a bird in the hand is worth more than two in the bush"!

And Pigs can't fly! but of course, you already know that!

Good investing-   HP

PS: and by the way, don't forget to pay down some debt this year. A great investment is not to owe more money than you have. You don't want that burden in retirement, especially in this environment. 

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