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"We've seen Netflix stumble before, especially maybe after a price hike, but not quite like this," Jim Cramer says.Mad Money with Jim Cramerread more
Thus the "Mad Money" host was inspired to discuss the proper mentality needed in order to be an investor. It can be summed up in one word—tolerance.
"I wanted to sentence him to watching several full length Mr. T dramatic expositions, because frankly if you think that what is happening on Facebook is painful then you should leave the table right now before you actually experience real pain," Cramer said. (Tweet This)
So what should you do if you somehow picked the absolute worst moment to buy a stock like Facebook?
Let's say it was March 21, when the stock was priced at $85.31. Facebook closed at $82.16 on Wednesday, and frankly, Cramer doesn't think the loss on that is really something to cry about. You have to be able to take the pain if you are going to own stocks, he said.
He also pointed out that, technically, as long as you didn't actually cash out of Facebook on Wednesday, there was not a real loss in the position. It is important to keep in mind that you would be down on a position that, if everything works out as Cramer expects, could earn $3.50 in 2017. Is that really expensive considering how fast Facebook is growing?
Heck, even if the stock went lower, Cramer would buy even more! The real problem in this scenario is the mentality. Once the stock actually goes lower, that would turn someone with a losing mentality into a seller instead of a buyer.
"A losing mentality is a mentality that is best left out of the stock market. It's good if you are in cash," Cramer added. (Tweet This)
And, seriously, if you are an investor who cannot take the pain, then the market is not a place for you, in Cramer's eyes. These days it seems as though stocks do not trade on traditional metrics such as fundamentals of earnings. Instead, they trade based on the mood of Greece or whether there are takeovers and restructuring in companies. In that case, Facebook could easily sell at $70.
Ultimately, part of the process in owning stocks is pain tolerance. If it hurts too much to look at stocks every day, then Cramer suggests not looking at them. And if that doesn't help—then it is time to sell.
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In order to be a successful investor that means adopting a mentality that things will get better for the company's stock that you own, the stock market it trades in, and the world in general. That is tough to swallow for some investors.
"It's happened quite often, but the only people who stay on the road are the ones who can handle what Mr. T dishes out. If you can take the punishment, welcome aboard. If you can't, sell now," Cramer added. (Tweet This)
Otherwise you never know when real pain could hit your portfolio, and you could go down for the count.