Real Money - Jim Cramer

[amyji]

I'm starting a Book Club thread to discuss different finance books and this one is for Jim Cramer's Real Money.

I'm only on page 72 and find it a pretty easy read so far. His style is different, but I like how he presents his opinions. Here are some of the things I've learned so far:

- Never use a market order. Always limit orders when buying or selling stocks.

- Speculate! Invest in risky businesses! However, speculative stocks should not comprise of more than 20% of your portfolio, especially if you're not in your 20s anymore. In your 20s you can be risky up to 50%, and you should go down 10% every decade.

- The price of a stock has no bearing on its value. Figure the PE ratio to see its value. (current stock price / current EPS = the multiple or PE ratio)

- Another way to evaluate a stock is by calculating its yeild. The dividend divided by the price.

- And one that's obvious: Be less risky with your funds intended for your retirement, while the rest that's used to augment your paycheck can have more risk involved.

That's all I have for now, the little nuggets of wisdom I've highlighted up to page 72 in the Investing Basics chapter.

[Justin]

Sweet I like little quips like that. Too bad I can't stand cramer!

[amyji]

Town recommends that until we get up to about $20k, we should keep all our funds in one stock. Cramer says that unless you have under $2,500, you should diversify among 5 stocks, with one being speculative.

So, for example, if I have $5,000 to start, I should put about $1k into 5 stocks spread among the sectors.

Sectors: Phil Town says we need to buy businesses we are familiar with, like and understand. For many of us, that would be retail industries. I'm a stay at home mom, former English teacher living in Thailand. I'm not in the tech industry, oil industry, or health and pharmacudical industry. At the moment, I know where I shop and it's either food or retail businesses I understand. Maybe some automotive since I drive a car and know what future car I'd like to purchase.

Cramer would say my portfolio isn't diversified enough! So how to come to a balance? Would you buy 2 or 3 stocks instead of 1 or 5? I think that's what I would do until I got up to some bigger funds to work with.

Thoughts?

[amyji]

Justin: At least Cramer doesn't scream at me in his book! LOL! I can set the tone of what I read in my own head. I try to watch Mad Money, but have to have the volume way low and try not to get agitated. When I do, I must change the station. I only watch because I know he's got valuable insights.

[dklisa]

Yes, he is rather overwhelming, not to say "headache-causing-personality". I could never finish one of his shows. Was with his book in hand at the book store the other day - but didnt buy. Would you recommend it?

I have invested the money I have set aside so far in 4 different stocks at pt. (below the 20K mark) I will narrow it down to 3. Like you mentioned, its hard to find great business we Know except for the kind you listed.

Am searching still

[steve44]

It is funny how many stocks go up the day after Kramer recommends them on his show.

Almost like the classic pump and dump.

Now if we could only talk to Kramer BEFORE he goes on the air !!

[Chicagoland Nick]

I find Cramer the perfect show to put on when I go to bed (the 11pm Central repeat). I don't have to SEE him, so I can take off my glasses and curl up in bed. And he's so loud, that by comparison the boring commercials usually put me to sleep.

[RonHaynes]

He seemed a little subdued last night (Friday 7/21) after the big market drop for the week.

[JDROCK]

I love Cramer's books, 'Confessions' and 'Real Money', love the show, too. I can definitely see how people can't stand him (My Fiancee calls him 'The Screamer'). I personallly like his passion for stocks & the market. Beats Louis Rukeyser for sure! The Lightning round does bugs me when all the doorknobs try to do unique 'Booyah!!'

JD

[Cherry Picker]

I read Jim's Book. It is too risky compared to Phil's. I am not ready for that kind of trading yet. Once I get the hang of consistent "safe" paper trading, I will get into real trading. If I make enough, I'll re-read Jim's book and may try some of his more speculative style trading with a small part of my portfolio. I do like watching Jim's show. It is kind of surreal, like Dali or something. :shock: