FEATURED SLIDESHOW
Who Is The Worst CEO?Mad Money needed new inductees for its
Wall of Shame, so we asked viewers for
nominations.
RECENT POSTS
- Mad Mail: Chesapeake Energy Is Hiring?
- Lightning Round: Royal Dutch Shell, Bank of America, RF Micro Devices and More
- Lightning Round OT: Harley-Davidson, Heartland Payment and More
- Cramer’s Christmas List
- Cramer: This Stock Offers ‘Plenty of Upside’
- Cramer Cuts Through Bears' Bull to Explain Tuesday's Market
- Cramer: Buy These 2 Dividend Plays
- Remorseful Regulator Leads Reform Fight
- Lightning Round: AT&T, Verizon, Novartis and More
- Lightning Round OT: Alcoa, Weight Watchers and More
Text Size 
This next rule sounds intuitive but it’s actually the exact opposite: past performance is not indicative of future success.
If you’ve made a lot of money playing a trend, or just investing in a hot industry, then your natural instinct is to keep finding new ways to play that trend. It’s an easy mistake to make, but it’s also an easy way to get burned. If you’ve been successful playing a sector trend, you can’t let that make you feel invinsible, Cramer says, because it’s a surefire way to lose money.
Back in late 2005 Cramer made this mistake, which is why he instated the rule. He nailed two stocks – JDS Uniphase [JDSU
Loading...
()
] and Conexant [CNXT
Loading...
()
] – small names in telco and cable equipment. Then he went and recommended a stock called Bookham [BKHM
Loading...
()
], not because he liked it, but because it looked so similar to JDSU and CNXT. He figured if they could make you money, why not Bookham? The stock did actually shoot up after he recommended it, but instead of encouraging people to take profits, Cramer said he thought you should hang on. Sure enough, Bookham gave back all its gains and then some. When Cramer recommended it, the stock was just under $7. Seven months later it was trading between $2 and $3.
Bottom Line: Don’t let the fact that one stock has caught fire influence your decision to buy a similar looking stock. It’s an easy trap to get caught in, but it can be a hard one to get out of if you lose big.
Questions for Cramer?
Questions, comments, suggestions for the Mad Money website?
Data is a real-time snapshot *Data is delayed at least 15 minutes