CNBC's Jim Cramer is sharing his basic tips for investors. The top rule? Don't be greedy.
As Cramer has said for years: Bulls make money, bears make money, but pigs get slaughtered. Too often, Cramer said, he's seen moments where people get so intoxicated with their gains, that they lose sight of the bigger picture.
"Back at my old hedge fund, I'd occasionally convince myself that it was okay to make an exception, to have a cheat day so to speak, to ignore my discipline just this once for some reason that seemed compelling at the time," Cramer said. "And whenever I broke my own rules, I almost always got burned."
If you let your winning stocks run too long, you'll end up losing all you made and then some, according to Cramer.
"That's the hardest part of investing, is holding on through difficult periods," Cramer said, "taking short-term pain so you can have long-term gains, which is what has happened in the stock market for a century."
Cramer discussed his own experience with feeling piggish but still ringing that register, even if it hurt him a little to do so. When Cramer first bought Amazon stock, he sold it off after a great run, even as the stock kept reaching new heights.
"I did feel like a pig after the stock's extremely profitable run, but I felt like a fool after it kept galloping," he said. "You need to recognize, though, that for every huge pile of cash that gets left on the table with a situation like Amazon, you're sidestepping gigantic losses like the kind you would've had if you had left everything on the table in 2000 or 2008 or late 2021."
Another part of keeping your inner pig at bay when it comes to investing is always paying taxes, according to Cramer. If you don't want to share your profits with the IRS, you may end up with none at all, he said.
"So many times, people will have gigantic gains, but they simply refuse to take any profits because they don't want to incur taxes that cut into their winnings, never mind that capital gains rates are pretty darned low versus ordinary income," he said. "Wall Street's littered with the broken hearts of investors who made this mistake."
Cramer pointed to one instance where he saw a presentation by a manager at a prominent hedge fund telling investors to buy Macy's because of its real estate value. He knew many who had made a ton over the years in Macy's but didn't want to profit because "they would've had to write a check to Uncle Sam." Shortly after the presentation, the shopping mall was obliterated by competition from Amazon, and Macy's stock fell by half.
"So, I want you to make your peace with the tax man," Cramer said. "Gains can be ephemeral — you haven't made any money until you ring the register."
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