When I first started investing in individual stocks, I was told that I needed to make rational decisions and not be swept away by emotion. That made sense until I had been investing for a few months. Then I realized how irrational the market itself was.
“It’s not fair,” I objected, starting to pout. “Even if I stay sane, the craziness in the market will wreck my investments!” I was right, too. I made sane investments that did poorly because everyone else was acting crazy. It gave me that horrible feeling of being utterly alone and losing control. I pouted more.
But there was some comfort to be found in an unexpected place—an investment book.
Jim Cramer’s Real Money: Sane Investing in an Insane World
In the first chapter, Cramer says,
While science has made tremendous strides in hundreds of areas of life, the stock market is not a science. It is just a humbling collection of pricing decisions involving the supply of equities and a level of demand mitigated by greed and fear, two animalistic, psychological components.
Amen, brother! After reading the whole book, that paragraph is still my favorite. It means that I am not alone and it means I might still be able to conquer the market. I’m going to rephrase his words and make my first investment rule.
Karen’s Investment Rule #1: The stock market is insane. Get over it.
One piece of advice that Cramer gives is to go ahead and make speculative investments but to limit them to a small percentage of your portfolio. As much as it pains me to admit it, that sounds smart, as do several other things he says in the book. I guess I had gotten so bored with his manic TV persona and his glib daily soundbite at TheStreet.com that I began to doubt his ability to deliver intelligent advice.
The book’s main flaw is that it’s a big ego-stroke for Cramer. Surprise, surprise.
I can’t predict whether Cramer’s advice will do me any good, but I’m willing to give it a try and see what happens. If I do well in the market, I’ll come back and give the book a higher grade. Of course, if I do badly, he can kiss that A- good-bye!