“One of the biggest obstacles to succesful investing is a lack of clarity about just what investing is supposed to mean,” he said. “I have seen countless people try to follow the conventional wisdom about money management, only to have their investments wiped out because the conventional wisdom is wrong. And the worst part is, these people had no idea they were making a mistake — they thought they were being responsible.”
First and foremost, Cramer said, it’s important to remember than long-term investing is not synonymous with simply owning stocks for a long time.
“In other words, don’t confuse being a good investor with the idiotic ideology of buy and hold, or as I skeptically dub it, ‘Buy and forget,’” he said. “Buy and hold has been the conventional wisdom for decades, and this one bad idea has lost people more money than the last two financial crises combined.”
A long-term plan doesn’t mean investors should take loss after loss in the short-term.
“Losses are losses, realized or otherwise,” he said. “And the notion of being in something for the long-term doesn’t justify owning damaged goods, the stocks of companies that are in bad shape, in the misguided hope that they’ll eventually recover.”
Cramer reiterated the idea that investors should keep track of their investments and do the in-depth research.
“Hey, it’s your money,” he said. “Invest the time in it.”
Cramer pointed out that sometimes companies experience a secular decline from which they never recover, in which case investors can’t wait for a turnaround.
“Just ask the people who rode Research in Motion or Nokia or RadioShack or Supervalu all the way down,” he said.
If anything, Cramer added, being in the stock market for the long-term requires more diligence and patience than if you’re in them for the short-term.
“To paraphrase that fabulous poetic amateur investor and world-renowned beauty, Gertrude Stein: A loss is a loss is a loss, unrealized or otherwise, and don’t you forget it,” he said.
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