Jim Cramer: 7 guiding tenets for new investors
“We are at a critical point in this market,” says CNBC expert.
On Wednesday Jim Kramer on CNBC warned retail investors who overclocked so-called meme stocks last week.
The trading activity that emerged on Reddit ignored the traditional logic of investing. In AMC Entertainment and GameStop stocks, it triggered an unprecedented squeeze of hedge funds out of shorts, drawing public attention to the phenomenon inside and outside the investment community..
After mixed dynamics for the day of stock trading on Wall Street, when the Dow Jones and S&The P 500 posted modest gains and the Nasdaq Composite dropped a couple of points, Kramer attempted to provide his investment advice to retail investors who had frenzied trading last week..
«If you are part of this new group of investors, I implore you to follow my seven new rules.», – the presenter addressed the audience «Mad money».
The new class of investors that Kramer is talking about is, in large part, the tens of millions of market participants who have started investing in stocks commission-free using trading platforms like Robinhood., last week.
At a time when AMC shares are down 56% from their peak and GameStop are down 80% from their peak last week, the Reddit revolution is at a crossroads, Cramer said. He advised audiences to follow generally accepted valuation principles, such as price-earnings ratios, to find stocks worth buying, pointing to stocks like United Parcel Service, Abbvie, and Alphabet, parent company Google, as examples of more affordable price ratios.
«There is only one good reason for owning stocks – and that is, of course, making money, ”Kramer said. We are at a critical juncture in this market, at a point where the cheapest stocks are often the best and the most expensive stocks are often the worst.».
«I want to reach out to the participants in the equity retail revolution … [and] put it in context because sometimes revolutions fall apart, ”he said. – Sometimes there is a two-day putsch, and then everything returns to normal; in other cases, they can take the radio station before the tanks arrive».
Here are Kramer’s seven guidelines for new investors:
– Increase your capital with stocks in companies that deserve to be raised over time
– Don’t try to destroy other investors
– Find Opportunities to Benefit from Emotional Trading-Driven Stock Movements
– Don’t Be Dependent on Government Action to Make Regulatory Changes
– Do not borrow money from brokers to buy stocks
– Keep a sober head and keep an eye on corporate income statements
– Invest in companies that are in good shape and are ready to do more in the future