Listen to Jim Cramer’s personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind - to help you make money.
Mad Money w/ Jim Cramer
Mad Money 3/11/24
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Welcome to Mad Money. Welcome to Cramerica. I'm going to make friends. I'm just trying to make you some money. My job is not just to entertain but to educate and teach you. So call me at 10743CMC or tweet me at Jim Kramer. Whenever you're listening to anyone's investing advice, you need to consider the source. And ideally, you want to know where that person's coming from. That's why tonight I'm going to tell you exactly who I am and how I got here. No, not the standard introduction. I'm Jim Cramer, host of Mad Money, co-host of the Squawk of the 3G, the DC Museum, the investing club. What I want to do tonight in an extremely special show by even Bioactive standards, is trace the arc that brought me to Mad Money. Not for some autobiographical ego trip, but to give you some money making lessons from the phases of my various careers. And explain, of course, how you can pop the phone. Remember, in the end, this is Cramerica and everything we do here is about trying to help you make money. In short, I'm giving you the Invested Cramer Guidebook. I call that the skinny on how I learned to be a good investor and how I continue to learn every day so I can help you become better than I would ever be. I want you to be better than I ever would be. By the way, that's our mission in the investing club, too. Let's start, real early. My love of stocks didn't begin after law school or college or even high school. Now, my love for stocks started back in fourth grade. That's for fourth grade. You see, my dad would bring home the old Philadelphia bulletin, but that brings a little time ago that I was. At that point, the Philadelphia bulletin was one of the largest newspapers in the country. He'd have it when he came back from work every night and give it to me. I wanted the comics and the sports. I was ridiculous. Philly's fan back then. I still am. It's a lifelong approach, and I guess, although I have pivoted hard toward the angles. I was also curious, kid. Curiosity's always been both a blessing and a curse for me, but I don't like the proverbial cat that's always probing, looking occasionally jumping on some hot stoves. Anyway, there was always this solid chunk of the paper that seemed impenetrable to me. The business section. It was impenetrable because it had these giant lists and names of an agate type that seemed to go on forever. There were the other tables, different from the batting averages tables and box scores. I'd scrutinized the regularity. When I read them from left to right, they may know, says to me, "What's whoever? Open range closed? What's open? What range? What closed?" What were these strange things? Why did they matter? I asked my dad, who I knew, dabbled in a stock market, because occasionally I hear him get mad when he heard prices that were mentioned on the radio, and particularly always seemed to get angry when I heard something called national video and how it went out. I don't know what video did or then go out and why it went out. I don't know if popped it either, though, but I know it made him furious. I wanted to know why. So he sat me down one day and explained that each of those lines represented the performance of a stock at a company on a different day. The open was where the stock opened in the morning. The range was how low and high it traded during the day, and the close was what it was worth at the end of the day. It fascinated me. I mean, how could there be so many companies? Why the heck did they trade in ranges? He told me that each day people tried it very hard to figure out which stocks would go off in value, and they wanted to buy them so they could make money from those moves. Frankly, this struck me as downright silly. I told him that when I looked at baseball tables, I was always trying to figure out who was hot, who'd go up on average, who'd go down, and what it mean for the teams I liked. Typically, of course, the Phillies. He said it was pretty much the same thing with stocks. You studied the companies like you studied the players. Just okay, somewhere hot as a pistol. And of course, others were just playing duds. I told him I wanted to figure out the stock market, too. I wanted to figure out which stocks would go hard. Just to get pretty else. I wanted to know if I could learn something from just following the ranges and reading the tables. He said, why don't you try? It seemed that my house radio was always wanting to pop the TV on in time for dinner. We always watched the news while eating. Even as I admit, I hated it because most of the news was about the war, and that meant the Vietnam War. And it was really seem to be going well at all. But right after the World News, the radio, or TV, they'd always mention Dow Jones and industrial averages. And they either talked about or showed the most active stocks then, the ones that had done best for worst. National video, pop stock was all from the worst list. And that's why I guess my dad was so angry. So what I did was write down the names that I heard and I tracked them. Kept them in a ledger I still have. What a terrific game it was. Trying to figure out the next move of a stock, not a player. Even as, oh, I really knew it was the name. Most of them were defense stocks, and they went up a lot in tandem with the war. After a year, I decided that was such a cool game, but I wanted to introduce it to my fifth-day class. And so I did, going in, show and tell with the Philadelphia Bolden, showing them that ledger invited them to play to see who could find stocks that would end up the most during the week. It means to say not everyone was into it. But the honesty happened not long after. My dad's company at the time, National Gift Wrap and Box Company, represented 3M, then known as the Minnesota Mining Manufacturing Company, in the Philadelphia area. He sold tape and sashine. That was a fancy ribbon that bowed easily. Remember there was a time when you had to make your own bows? Triple M, as we called it, was always innovative. Coming up with new product lines, which it still does. These days also plagued, unfortunately, by major litigation issues. What about fifth-grade pop came home with a new line of 3M products he was selling? Games! That's right. They got into what was known as 3M bookshelf games. He said perhaps I might want to learn more about the stock market, and he had two games that he was selling well about business. One was a choir about takeovers, and the other was stocks and bonds. I was quiet when a good friend bought me this recently. I love that game so much. And at one point, I even asked the old CEO of 3M, "Bring the games back." Apparently I'm on the rights anymore. But the point of mentioning all this from my own makeshift stock game to stocks and bonds is that stocks are fascinating enough to get your kids started on them right now. And I'm urging you to do just that. It's easier than ever. Pick some stocks. Maybe some stocks and companies that your kids are familiar with. Then have them track those and guess which will do best over time. So here's the bottom line. The bottom line, at least in my childhood stock market obsession, get them started early, and they may play for life. Because unless the stock market, it's a long-term contest. The earlier you get in, the more you can potentially win over the long haul. Let's go to Dave in California, please. Dave. Hey, Jim, thanks for taking my call. Of course. What's up, Dave? Jim, I'm an older retired investor who's moving most of my stock portfolio games into key bonds and CDs. What are the advantages of bond ladders and how do those work? Well, I mean, look, I think that what I like about a bond ladders, it would normally matter a great deal. The yield curve is so flat. I'm trying to think it really doesn't make people want a ladder bonds right now. It really doesn't make a lot of sense. I want you to stay short. No reason to go out in the long end. And you can just keep reinvesting like that. But I also want, I'm not sure of your age, but I always want people to remember that I think you don't want to bet against yourself and put too much money in bonds. Because stocks still represent the greatest opportunity. And don't forget, utility stocks, they can play a role too. They could have multiple years of goodness. Let's go to Philip and Michigan, please, Philip. What's up, Philip? Hey, Adam, thank you. I've been listening to your show since 2006, and all of my co-authors turn the end of the show, and you've made me all sorts of mad money. Oh, fantastic. Thank you for that. Thank you. I'm also a member of the few new feedbacks and calls, and I'm going to turn into you really listening to you there as well. Okay. So the question is, so I know that you referred to a dividend reinvestment as one of the world, and I'm totally there with you. All right. My specific question is, should I involve myself in my brokerage dip program, or should I take the cash, and then pay back to work in a stock name? No, I am a huge dividend reinvestment plan person. And I, in fact, I wish there weren't an alternative. But for my travel trust, I have to send the dividends out. And it has really hurt my long-term performance. You can't, you've got to reinvest, and that's where some big money can be made. All right. One of the biggest things I learned from getting interested in the stock market early is that it is a long-term contest. The earlier you get in, the more you can potentially win over the long haul. Oh, my money tonight, I'm giving you an inside look at how I got to where I am today from growing up to Goldman Sachs. But on the way, you'll learn the best practices I learned about the market and how you can incorporate these life lessons yourself. So, stay with Cramer. Don't miss a second of Mad Money. Follow @JimCramer on X. Have a question? Tweet Cramer. #MadMensions. Send Jim an email to madmoney@cnbc.com. Or give us a call at 1-800-743-cnbc. Miss something, head to madmoney.cnbc.com. Resourceful small business owners know how to get value from the purchases they already make for their businesses each month. The Enhanced American Express Business Gold Card is designed to take your business further. It's packed with benefits and features, like four times membership rewards points that automatically adapt to your top two eligible spending categories every month, on up to $150,000 in purchases per year. So you earn more where your business spends the most. Plus up to $395 in annual statement credits on eligible business purchases at select shipping, food delivery, and retail subscription merchants. 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Listeners of this show get a $75 sponsor job credit, giving your jobs more visibility at Indeed.com/MadMoney. Just go to Indeed.com/MadMoney right now and support our show by saying you heard about Indeed on this podcast. Indeed.com/MadMoney. Terms and conditions apply. Need to hire? You need Indeed. Welcome back to a bizarrely special May of Bunny, where I'm teaching you life lessons in investing. From my wife. Well, I'm not a dollar sign represented by a man or a stock symbol for that matter ticker JIM. I've stumbled around the stock market long enough to learn a thing or two. So tonight, you're getting some of the wisdom from the School of Hard Knocks that I've enrolled in and passed. Don't you always love it at the beginning of a Pro Football game where they had the player say his name into school and some say School of Hard Knocks? Well, that's what I intend to when it comes to stocks. And you are getting the made for TV version right here, right now. For law school, I went to Harvard though. We covered how I first got involved in the market. My fourth great obsession with keeping a ledger to track stocks. And then ultimately, learn how they trade through the greatest game on earth. No, not monopoly, but stocks abouts with its little certificates, its game board, its cards about news that would set a stock higher or lower. I love that game. I love the stock market games behind by the time I got to middle school, which we call junior high back then, where my obsession became sports. I was the second fastest guy in the school forever. So I ran track and then, of course, girls who my teenage self found far more mystifying than the market. Maybe still do. Anyway, that's the subject of a different show entirely. However, my father did ingrain in me the desire to save money. Early on, I learned that even in high school, I saved this. I bust tables at the old blocking cleaver, which, of course, we called the blocking cleavers because we were really funny and we were at the height of adolescent humor. I saved more working as a vendor at the old veteran stadium selling first cold soda than ice cold. That's why I did it. Hey, ice cold. I got ice cold soda here. Then I only graduated to sell an ice cream. Hey, I got ice cream vanilla and chocolate. Very quickly, I learned the value of market power, specifically cornering the market. And I paid people to give me the exclusive right to sell ice cream. Hey, ice cream here won the 600 and then on the 700th level, which I own by keeping everybody out of it. Can you imagine how much money can be made if you had the only franchise, the whole upper deck? Well, at least it's the upper upper deck. Even for a team as horrible as affiliates with one of us, no games. I made fortunes except the one time they gave me strawberry ice cream. Talk about having to run from a customer after they sold him that stuff. Or when Steve Carlton pitched because left he was on the mountain. He got fired out so fast that I got stuck, unsold ice cream. I had all this strawberry and he can't take it home real bad. You have to buy it from the company before selling it so I take a beating whenever I call it Muslim. That's a business lesson. Talk about learning how business really works. The shelf life of ice cream on a hot July night after the night thing is about as short as short a bit. By the way, during the lightning round, I might just with you about your name calling you a skipper, a cat. How are you doing? Chief. I learned these things at the ballpark. Because when people call me to get my attention to buy ice cream, a chief. And, frankly, I loved it and it's bizarre intimacy and I never forgot the moniker's bud. I mean, partner, and that's why I use those terms. Only have money. Anyway, I've had a ton of money. If the advice of my father, I open an account of fidelity with the Magellan Fund. I contribute a little every week. It was the pop top for a mutual fund of its time run by the great Peter Lynch, who's written two investment books. One up on Wall Street and beating the streets, still available on Amazon. They are fabulous. Get them. I didn't save enough when I got to college. The money paid was work study anyway and it went toward my tuition and room board. But what I got out of college and after multiple attempts to get a job in the newspapers, I was rejected by 57 papers. I still have the rejections. I've saved every one of them. I hate everybody who rejected me. I land a position as a general sign reported in Dallas. I'm a crack-naked hundred-fitsies bucks a week. A hundred-fits bucks a week was not a lot to really kind of. Well, anyway, I still got my tattered paste up. I've got it in an old wallet to remind me of how hard it was when I got started. Nevertheless, you know what? I still saved. I put a few dollars away when I put a few dollars. I mean, like maybe four dollars. Not that long after that. I applied and got a job at the now-to-front Los Angeles Heartland Xamarin. Now it was a horrible job paying $179 a week. But as you can imagine, Los Angeles more expensive than Dallas has. So we went after my soldier and began Los Angeles. I found this terrific bungalow apartment in Los Angeles, the Fairfax district, right in your canners, pretty sketchy around the corner from Pioneer Chicken, which was way too expensive for me to go to. A few weeks later, I was stalked. My place was broken into repeatedly something that cops were helpless to stop. At the same time, I was assigned a story in San Diego, a horrible shooting. And when I returned, everything was going. Everything I had, including my checkbook, of which, of course, was cleaned out. So it began. My terrible, but thrilling, six months of living in my car, basically trying to get by. While my ultimate goal was to save enough to get an apartment, I was living hand-in-mouth. And people would take me in now and then, so I'd get a shower. It's really important to live in a car to get that shower. Or maybe in a good night's sleep. But you know what? I never quit saving. I never quit saving. I never cashed my paycheck every other week and then, writing a check, yes, to Fidelity. But gel and fun. For what I could afford. You only had to gas the car insurance and food expense if you're living in your car. During saving on homeowners insurance, by the way, it was very expensive back then. News to say, it was unsustainable. When I only came down with modern nucleos, then the attendant joined a sliver, a yellow spot about the size of Greenland, the old branch where I was at last station when the company mercifully put me on the road. So I could at least submit some expenses for my day-to-day. So I had a little migrant farm workers clinic to get fixed up. And I still put money away. Even then. Even though I was making weekly trips to the doctor, who was one of the best I've ever had. But the upshot of investing is this is a challenge. The whole story is a challenge. And this is what it is. If I was living in my car and I invested, I never went here that you didn't see. Never. That's why I went through this. Amazing with the Magellan run back. Back then I was giving money to the best stock figure of all time. Fast forward 35 years later, I had enough to take advantage of one of the greatest pull markets in history. Magellan money ultimately amounted to a fund well into the six figures. Not because of my additional contributions, which remember only just a few dollars a month. But purely from capital appreciation and the power of compounding. I never touched it. Still haven't. I just let it build. I think the take point here is that I want you to save, no matter what the excuse. Obviously they're really the better. You're thick and thin. Listen, when CBC has those all-star managers on it, keep it open. If you've got enough money or to handle the time to own stock portfolio, you can only own one or two stocks. Send the money in as little as much as you can to an index fund, to one of these big mutual funds. If you need help managing your own portfolio, join the investing club. I think that's the best way to go. And here's the real bottom line. If I could still send those checks to the Galilee Magellan fund when I was living in my car, sleeping in the back, Jack Daniels, and a hatchet, and then, ultimately, a yes, pistol. Sick as a dog, join us, liver. Then what's your excuse for not getting started? You can put some money away, too. That's the way I was living. Looking for a rewarding, life-changing opportunity that enhances the lives of children in your community? With almost 50 years of experience, Huntington Learning Center is the nation's leading K-12 tutoring and test prep franchise. 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I'm giving you the life lessons I've learned the hard way through decades of investing. Right now, I want to tell you how I got started in individual stock picking. Something you know I love and still believe in, even if for multiple periods of paying, chaos, and chicanery. Presumably you believe too, or else you wouldn't be watching. If you're picking stocks, playing with real money, not just with a ledger over the game of stocks and bonds, you need to open an account. When I got started in 1979, there was no such thing as an online account. I had my money with Fidelity courtesy of my Magellan Fund account, so I chose to put my individual stock account there too. When I first began, I didn't know where to look for ideas, so I turned to a magazine I liked Forbes. Now, people of Forbes please don't take this personally, but I read a nifty article about American agronomics, a terrific orange grower in Florida, seems to have compelled me to put 10 shares of it for 9 bucks. Me, later, Frost hit, wiped out the crop, and my investment was more than cut in half. Like the plot of trading places, an all-time great Indian Murphy movie, if you've ever seen it. Well, what can I say? Pretty similar. I was devastated, but not defeated. I sold it out, took the capital, and put 7 shares of Bobby Brooks, a clothing outfit I'd heard of, which again Forbes said could be to provide. Almost immediately, the company reported a big quarter of my money had to get. Fortunately, I had a decent job at a magazine called American Warrior, which just started. I was making 20 Gs, and living in a less than swank studio on 44th Street between first and second near the United Nations. The cheap $40 a month rent allowed me to replenish my stock offers pretty quickly. I was on the road quite a bit back then, and after a particularly hard night on the town researching and storing Kentucky, I fell in love with the breakfast at Bob Evans Farms. Finding out that it was publicly traded when I went back, I visited that huge fabulous Midtown Manhattan, New York Public Library. Everyone's with the big lines in front of it, and devoured everything I could find about Bob Evans. They had magazines with articles, microfecing for four month old financials, investment publications. It would write-ups that allowed me to compare Bob Evans with other companies in the industry, which is what you have to do. I knew I had a good one, so I bought 20 shares. Stopped went up immediately to a good quarter of stock split, and I figured out the first good component of investing. I know what you own. What did I know about growing oranges with the market agronomics? I mean, who died knowing about women's fashion? I mean, certainly not me! But a good plate of scrambled eggs and sauces you have to harden out on the town. Well, that served an attractive setting, good service, nice enough growth, a big plan to expand the Midwest. That was for me. Next up, SPS Technologies. That's the old standard press deal, an outfit from my old hometown that made faster screws for airplanes. Something at how Met now dominates, why SPS? Because a buddy in my high school catching up and told me that they were hiring like man if I was looking for a job. Paying good money. Well, I already had a job, but back to the library for more research, solid company, no debt, but nothing impreent about its hiring push. Wow, ripe for a trade. SPS doubled not long after, and I caught the bug for good. Twenty years later, it would be acquired by precision casplers. The preeminent supplier to aircraft builders around the globe, before a PCP went on, to sell itself to Berkshire Hathaway in 2016, good bloodlines. So now I'm figuring it out. The best investment ideas come from what you know, mailed it with information gleaned from public sources. Even if they're as late and as hard to access as taking a surreptitious trip to your public library when I was supposed to be working. I didn't like the random way I was making money. A friend from home's lucky call about jobs available at SPS Technologies, a hearty breakfast at Bob Evans Farms. I figured that'd be a more rigorous approach, right? And then it hit me. Look around, it works, stupid. At the time I was covering mergers and acquisitions, but looking at the lawyers who do the deals, profiling some. Following the deals they were at once. It seemed like every other deal was in the oil patch. Why did you know that smaller than the size of oil companies were being acquired? All I was doing was standing around writing about them. So I went back to the library, took out some editions of the thing called Value Line, Stock Research Magazine, and checked out the pages devoted to oil companies. Then I crossed references with other research to find out which ones could be acquired without problems. Either because they were publicly traded without a family owning them, or because they seem to be fit to size. The parameters were so many other deals. So I said all this thing called Natomas, an oil company with a real gusher in Indonesia. Oh, I didn't have a long doing. Her McGee's struck. Bottom. I almost told my money. Another lesson learned. When I buy day covers by companies that would do well on their own, Natomas was. But it was under match, which was the consensus I found. I read in New York about the oil enterprise. That meant another oil company with bigger scale could do more with Natomas, which was cheaper than it should be if it simply got rid of the existing management. As much as I hit some winners, though, I was distraught that I'd given up the ghosts in those first few trades. At the time I'd been hanging around the track on weekends. Let's see aqueduct. You're by. And I learned how to handicap by reading the books of Andy Beyer, the legendary horse racing writer. He is something, okay? Beyer's picking winners is among the best investing folks ever written, even as his betting on the ponies. It teaches discipline. How to identify the best third or best to bet on. How to find the best long shots. Going to the alloy tracks for measurement was less well known, not betting really knowing on every horse in each race. Find the ones where the payoff was more sure and bet big. Cut your losses if you're having a bad run. Every one of these lessons could be applied to the stock market, right? I mean, anything you'd swing when you know what you're doing, particularly when others don't want a less well-known stock alloy track. Don't just gamble on stocks from the excitement of it. That is foolish. Most important to be disciplined. Don't let your losses pile up. After five years of professional journalism, I decided to hang it up and go back to law school. The good news? I'd save enough money to pay for my first year. All in the stock market. As I never would have had enough money to cover the cost of it, I'd just kept my money in a savings account. So here's the bottom line. You want to get started? Go small. Invest in what you know. Restured intensely. Just research, research, research. Back then, I got old data from public library. Now it's as simple as a keystroke and the information is free, including up-to-minute financials, analyst presentations, brokerage research, and, of course, the conference schools. And I tell you, our must, if you want to actually know what you're doing. Simple? No. lucrative? You bet it is. That's kind of Michael in California, please, Michael. Yeah. Jim, first of all, thanks for taking my call. Of course. I'll try and make this as quick as possible. I know you got a lot of people to help here. Nick has to concern my two children. I inherited recently quite a deal of money, not a million dollars, but a substantial amount. And I'm looking at a 20 to 30-year timeframe here. I've been investing for them since the day they were born. They're doing all right, but I want them to leave them some good, good money. I'm thinking on the lines of Berkshire B and now this is putting all this money. Berkshire B and ETF, a Vanguard ETF, or some of that somewhere along those lines. I think the S&P 500 fund and the total return funds are both really good for that kind of situation. Vanguard is total return. The one thing I would caution is as much as I like Warren Buffett, I just think that you have to be, you have to have kind of a basket if you do one stock, but if you do the ones that I just mentioned, you don't need a basket and you don't have to keep track of them every minute. By the way, if they're young enough, maybe you give them something that they actually want to spend some time learning about, and that could be good, too, to keep them invested and interested in their money, but thank you for those kind questions. Let's go to Loyl and Arkansas, Loyl. Yes, sir. How are you doing, Mr. Kramer? I'm doing well, Loyl. How about you? I'm doing all right. I don't want to know getting back into the market with 11K. What's the best way to have a long-term goal, but get a short-term return within a year or two on your investment? Well, you know, it's too risky, frankly. At one time or another, I think in my earlier years, I would have suggested call options and then also some longer-term stocks and mutual funds, but these days, I'm just against the short-term stuff. I can't deliver and I don't want to encourage trading, but thank you so much. I wish I could do better for you, but it's just not my thing. Trading things, not my thing. Anyway, if you want to get started in stocks, go small, invest in what you know and research intensely. The process may not be simple, but, boy, it can be lucrative. All right, much more mad money ahead, including an inside look at what I learned from my time at Goldman Sachs. Plus, I'm taking your investing questions with my investing club colleague, Jeff Marks. So stay with Kramer. What I show is all about you learning from my attendance at what we call the University of Financial Hard Docs with a major investing. I have taken you through the importance of getting started early, saving no matter what. I've shown you how to spot winners. I avoid losers. Stay disciplined, all through looking at my actual examples in my life. Now I want to give you a sense of how you can become a trader. Oh, here we go, a good trader, and I don't normally recommend this. It's not the direction I like to take the show. Some money has changed time and time again, and after the first few years, I've delivered we've skewed it away from trading, and trading ideas are much more toward long-term investing. And that's because there's so many more obstacles to trading than investing these days. When you're a trader, you have to watch your positions like a hawk during the day, to the point where it's very hard to do your job and follow the market. There's so many people with such a great set of tools and the ability to access information real time, there's so many different products that allow hedge funds to move stocks around like toys. It's very hard to compete against them. You can't do the one-on-one, especially when you're doing it part-time. But there's so many advantages you have now that you sure didn't when I started trading in my law school dorm back in 1901, and I was trading non-investing. First, commissions are non-existent for home gamers so you can get in and get out without much friction. Your broker doesn't even take the fee. Second, the information you need is on your personal computer or even your smartphone. Back in the day, I had to call brokers and watch the ticker on an FNN, pretty close to CMBC, by the way. And third, trading is lightning fastened. Back then, I didn't even know what price I paid for stock or what I'd bought at market order, whatever. When I was in class, I had to use payphones and a cell. You often had to wait at one payphone in the classroom building while some kid chatted endlessly and aimlessly did his girlfriend, maybe some woman called mom. At the time though, I had to go with what I knew. I knew individual stocks for all the stories about Harvard Law School, including the movie Paper Chase. I can tell you there was tons of downtime at Law School and terrific business school library that had a lot of cell-side research. That's the stuff the brokers turned out, along with up-to-date microfiche, quarterly importance is embodied under that. For those who are too young, remember microfiche, they miniaturized everything into a little piece of film. And then you had to read it through a machine that was basically a glorified microscope. All things considered, I possessed the best publicly available information at the time for a student that you get in the early eights. The first thing I decided to do though, given the circumstances, was to work on finding one trading idea per week. My reasoning was pretty simple. You can't be a lot of the map if you're doing this as a hobby, even a time intensive one. I figured I couldn't take a lot of chances until I really knew what I was doing, a very valuable lesson if you want to start trading. I discarded a ton of ideas looking for stocks that had catalysts up coming to ports or possible mergers and stock that could rally based on the other parts of the newspaper. An article on the front page might be talking about some breakthrough in medicine. A brokerage report might discuss the potential for new oil fund. I got on a roll when I started my first writing about the market, it was a newsletter called Mr. Bullish, which I made out only to my parents once a week since nobody else cared about what I thought. It clearly articulated the thesis by any trade I did. I did not trade if I couldn't explain exactly what the company did and why I liked it and what would happen to the stock, what was the catalyst to buy. No buying of anything didn't have a clear exit strategy for the moment I put the trade on. Again, an important lesson made disciplined by the insistence of written thesis before I pulled the trigger. When you trade, you've got to trade with confidence. Otherwise, you can easily be shaking out by the broader market. You want to trade with confidence, well, ask yourself, would you be willing to put a stock recommendation on your voicemail? Yeah, we used to have those and update it every week. Well, at that point, it was a quarter. If it's something like this for me, hi, this is Jim Kramer. I'm not here right now, but I like monolithic memories at $32 ahead of the next quarter. Yeah, I actually did that. That's the level conviction I had about my picks of the week. Of course, I was putting my money where my mouth wasn't managed to augment the winnies with work. I got from my old employer, American lawyer, I was in freelance work for the New York Times and some legal work for a professor who moonlighted doing these criminal defense cases. It's kind of a famous guy, but won't go into that. It wasn't before long that I followed by the name of Marty Purds, at that point, the publisher from the New Republic, also professor, the teacher at Harvard, tried to get me to write a piece. I neglected to call him back, so he inadvertently got three weeks' worth of trades from my answer machine, all successful, and he told me to meet him at a coffee house nearby. When I did, he said that he made more money from my answer machine than he had with years of professional money managers, and he wanted to give me a half million dollars to manage. I said, "I didn't think I was capable of handling that well." He said he had confidence in me, and shortly thereafter, when we were having a couple of coffees, pulled out a check for a half million bucks, that was real money back then. I ran down to Fidelity with the money and set up an account and went right to work trade, almost immediately I lost a ton of it. I could see how I might have to watch decisions, Marty's house made most lawn for about like a hundred years to make back the 70s cheese, I had just blown just me the rinse. My mistake, as Clinician told us in that seminal movie magnum force, it means it's got to know its own limitations. You see, you can't trade a huge chunk of money at all at once. Total violation of all my weekly discipline, right, you can't put it all to work at once, you have to do some, you can only do that after you're done on a huge amount of work, you have to have a chance to pan out an entry point, you have to come up with a reasonable entry point and an accident. In other words, you have to know how to trade, and I didn't, and I had no discipline. I had violated my own rules, and I blew it. I could best my students tomorrow, and he said, "I said please take the money back." Instead he wanted me to have more money, betting that I had learned my lesson. You know what, he was right. I reverted to my old style, trying to be right about one idea at a time, keeping the resting cash, doing a huge amount of homework, going big when I had the most conviction, the way any good trader would. I slowly but truly made it back while I also paper invested, a more active but not truly trading prefer to get a better feel of things. That would become the beginning of my actual professional investing career, and we made a huge amount of money to get it, don't mind saying that. So here's the bottom line, if you're trying to trade, make sure you have a catalyst and exit point where something's supposed to happen, and then get out of the stock even if the idea doesn't pan out, because you're trading, not investing. You need conviction, and you have to ask yourself, "Would you be willing for the world to hear, "Hi, it's me, I'm not here right now, but I want you to take a big swing at Disney ahead of the analyst meeting." If you can do these things, start small, give me a try, and get money back. Welcome back to this special edition of Bad Money, where I've been teaching you life lessons in investing from my life. Now we're up to the professional grade, when I started at Goldman Sachs. I've been quoted by Goldman for three years before I got a job in what was then the security sales department, helping individuals and sponsorships manage their money. I've got a ton of those history for those years, and if you want to know more about it, I suggest you read confessions of a street out of my autobiography. But tonight's show, like every show, is about learning how to trade and invest. So I'll dispense with the anecdotes and try to teach you how to make money from the events that transpired from my time at Goldman. First, that's when I began understanding the process of actual money, imagine. The ability to build a portfolio from the ground up, and I had the best teachers in the world. One of the great hedge fund managers of our time, Lee Coopman, he was the research director of Goldman, and he put on investing clinics almost daily. But you know who I learned most from my customers, chiefly wealthy individuals from all walks of life. At Goldman, I learned something that to this day can't be understood by so many professionals in this business. Individuals can and do beat the market quite regularly. I have what's known as non-discretionary accounts, meaning that I wasn't allowed to invest anyone else's money with my own ideas unless I could win them over to make the purchase. Remember, I was on commission and made money only with the buys or sells I could convince people to act on. That's where I learned how important it was to talk over a story with an individual and be able to articulate it in a way that made sense to them. If you do that to someone when you're picking a stock, you had to know your stuff. I often ask my clients questions about whether they knew enough about the stocks that they wanted to buy. I wanted them to be as educated as possible too. That's because I knew that if the stock went up, it would be their idea but it went down. It would be mine. Come on, that's human nature. What else did I learn? How about humility? It was at Goldman Sachs that I first figured out how humbliness business could be. The great '80s bull market had just started not long before I'd been hired, almost all stocks had tremendous tailwinds. But when one of your ideas went against you, you had to get on the horn and explain either why the person should buy more or why they should cut their losses. I also learned to let your gains run while you cut those losses. I learned the hard way. Many of my clients were terrific business people who didn't really know that much about stocks. They'd just been fabulous at running their own enterprises. I had a real Ken Tanker's client, a real estate tycoon, who I worked hard to get, trying to win them over for ages. I told him I'd be judicious to work hard and get it right for him. He said he didn't want trades. He wanted long-term investments. At the time, I happened to like the stock of Kimberly Clark. I told him that I thought this one would be a terrific addition to his portfolio. He agreed, and I bought him 1,000 shares. Honestly, immediately, the stock went up eight points. Oh, I had a winner. So I called him and I said, "Bob, I want to ring the register and sell the 1,000 shares of Kimberly Clark." I thought he would thank me, but he was furious at me. He told me that I had said that Kimberly would be a good long-term position, that it could have great gains over time, and that he wasn't the least bit interested in only making $8,000. If any questioned my integrity, and wanted to know if I was churning him a horrible charge, meaning I was just trying to generate commissions off his account, you know what? I was scorched. I was burned. But it taught me a terrific lesson. Just as you don't want to turn a trade into investment because that's usually a sign that you're embracing a loss and trying to invent reasons to stick with it, you also don't want to turn an investment into a trade. When you have a good one, let it run for heaven and say, "Bob was right. Kimberly Clark Hall will be doubled," and I was vindicated despite myself. Finally, I learned the science behind building portfolio and understanding how to create long-term wealth. A lot of my business involved contacting people who just came into a great deal of cash, either through inheritance or through the sale of business. I regarded my first job as listening to their needs, trying to figure out what they wanted. Were they conservative? Did they want capital preservation? Were they aggressive? Did they want capital appreciation? I tried to get them to know them and urge them to get to know themselves just as you should know yourself. Can you handle the pain of a market decline? Would you prefer your money or appreciate it slowly and get most of it from fixed income, meaning bonds or from dividends? Do you want to participate in new issues? Do you want to try to hit it out of the park with some of your capital? Of course, many of you are familiar with these lessons. I know that. You've heard me say it in time and again on air preaching them constantly to the CBC investing club. I want to teach you how to know yourself, to know what you can handle and what you can. Finally, this is when I learned the value of diversification. When I first got the Goldman Sachs, the oils were hot as a pistol. I mean, you understand those were different days. You could have an oil company's double and then double again a short time as they fit struck oil. If you're like, "Wow, how big those fines must be?" So everyone got caught up in the oils and the families I work for wanted oils. I wanted oils for my personal cat. Every day you seem like another great day in the oil patch services drillers. You name it. Then one day, oil plummeted. The sortie started pumping like bad and some global tensions that had jacked up the prices were settled. Next thing you know, the bull morphed into a bear. Those who own nothing but oil stocks, including nurse truly, were crushed. I learned firsthand the concept of diversification. And while vacationing violated some of my rules, I never again intentionally avoided diversification. This is the bottom line. From my early days at Goldman Sachs, I learned the core principles of investing, finding solid ideas to build a diversified portfolio to create long-term wealth in a way that suits the customer. Consider yourself the customer of this show. Stick with me. What do this entire show tonight, you've heard me pound the table on how investing in the stock market is a long-term contest, emphasis long-term. So you're never too young to start investing, just like you're never too old, but learning new things about the market. I love to teach my viewers and also learn from them, which is why I always say my favorite part of the show is answering questions directly from you. So tonight I have Jeff Marks here, my portfolio analyst, partner in crime at the CBC Investing Club. We're going to answer some of your most burning questions, which are always amazing, frankly. I've learned so much. I'll also give you an inside look at what we do in the club. By the way, if you're not a member of the club, you can scan the code behind me or go to cnbc.com/investingclub to sign up. I sure hope you will. All right, let's take our first question. First up, we have a question from Sandy, who asks, "My husband and I are at retirement age. He likes dividend stocks, but I don't like holding them when they lose value, and my original investment is in the negative. I prefer solid growth stocks to continue to build our portfolio. Keep or sell these losers." Now I'm going to start by telling you right here, retirement age. That's the eye of the beholder. I have been a big believer, contrary to the entire industry, in saying there may not be a retirement age when it comes to stocks. I think that people should always be investing for growth and some for dividend and then some for bonds. So my answer to this one is that you have to kind of, in times, take the risk, but you just use smaller amounts of your capital. Yeah, I think there's always a balance to everything, right? One thing I would point out is, without knowing the stock, if the dividend investment is in the red, well, maybe they're not growing their cash flow, their earnings, maybe they're not growing their dividends, and that could be a red flag that something's wrong about the company. For instance, you know that we got involved with Footlocker and their cash flow decline, and what looked like a good dividend stock became a non-dividend stock. So Sandy, I think that you, unfortunately, you have to do a level of homework. Of course, during the club, and we will point them out, and then you say, "Listen, we missed Footlocker." You're going to miss things. But what matters is, I want you to have more exposure to the stocks than people expect, because retirement age may be something that turns out to be 20 years before you need to grow capital for that 20 years, right? Next up is Bruce in Nice and Michigan, and he says, "How do you set price targets?" I'm going to defer to my colleague, who does a lot of the price target setting? Well, look, I think it's an art and a science, right? There's no one standard rule of thumb to apply, but what I will say, though, when looking for price targets, what you can do is look at some historical multiples of where stocks trade at and try and figure out how much you think the stock will earn out in the future and apply that. But another key consideration, too, is that if the company is improving its margins, maybe taking share, then it would deserve to trade at a premium versus historical levels, or maybe at least catch up, so to speak, the multiple re-rate closer to some peers in this phase. During the great runs that were Lilly and Nvidia, how did you go about setting price orders? Well, I mean, look, those are also some of the great momentum stocks in the last couple of years, too, so that, I would say, is a little bit of an art. But again, stocks like that, you also have to look out years out in advance, too, especially in the case of Eli Lilly, where it's more towards the end of the decade is where it's GOP-1 sales won't really be there. So people know, we take the very shares. Okay. Now, let's go to Lindsay in Oregon, where my daughter had her formative years, who asked, how do you trip a position, do you sell shares with the lowest cost basis or the highest cost basis? Well, this is actually, this is an accounting issue. There are rules on what you can and what you can't do. We are, just people know, we send everything out, all our capital gains out and all our dividends out, and we often want to try to get rid of the ones that has the worst basis. That's been our kind of stocky trade. Yeah. I mean, look, this is always a question of tax considerations, right? Because if you're taking a profit and you're selling a lower tax basis, you'll trigger a higher realized gain, and on the other hand, if it's for a loss and you sell that lower basis, it's a smaller loss. So it's tax considerations. Right. Now, just so you know, my accountances, Jim, just take it as they come. Last and first out, why is that? Don't ever get in trouble. There's my lesson for the IRS and you. I'd like to say there's always a bull market somewhere. I promise, try to find it, just bring you right here, old man, buddy. I'm Jim Kramer. See you next time. All opinions expressed by Jim Kramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC, NBC, Universal, or their parent company or affiliates, and may have been previously disseminated by Kramer on television, radio, internet, or another medium. You should not treat any opinion expressed by Jim Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. The opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Mad Money disclaimer, please visit cnbc.com/madmoneydisclaimer. CEOs are in the business of making decisions, and it's the outcome of those decisions that define their success. Hi, I'm Sam Ray, CEO of VISTAGE. For more than 65 years, we've engaged with more than 100,000 executives on this twisting leadership journey that we call a life-a-climb. Join me on a life-a-climb podcast to hear first-hand stories from CEOs about the challenges they've overcome and the lessons they've learned along the way. Listen to a life-a-climb wherever you get your podcasts or at VISTAGE.com/podcast. 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