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Cramer: Trust Your Thesis

Cramer has a new rule: Never turn an investment into a trade.

Just so you can differentiate between the two, let’s define the terms. A trade is a short-term buy specifically to profit from the bump that comes with a strong quarter, new product or something similar. An investment, though, is a stock you want to hold for much longer, usually about 18 months, Cramer said. Investments forego the quick gains for even bigger returns down the road.

A lot of times investors –even Cramer – will catch a jump in share price on a catalyst and then exit the stock. Even Cramer did it once when he bought Apple at $26 back in 2004 on the strength of the iPod. He caught five quick points and cashed out. After that, the stock soared toward $200, and he missed the whole trip.

Cramer’s suggestion: Don’t do that. Trust your thesis, and stick with your stock for the long term, especially when you’ve done your homework. Why settle for $5 when you could have $50?

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  • Jim Cramer

    Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

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