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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