Jim Cramer: How To Make Fewer Financial Mistakes And Get Rich

Posted: Jan 6 2014, 8:16am CST | by


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Jim Cramer: How To Make Fewer Financial Mistakes And Get Rich
Photo Credit: Forbes

Jim Cramer is one of the most prolific and recognized men in the financial world. Very few people can boast his media resume and his investment acumen. He is also the founder of TheStreet.com, one of the most popular financial media websites, and serves as host of CNBC’s “Mad Money” television program. In addition, he is the co-host of CNBC’s Squawk on The Street. He’s appeared on 60 Minutes, The Tonight Show, The Today Show and has written for Time Magazine and New York Magazine. He also started Active Alerts Plus, a subscription model where investors can access his portfolio of stocks

Cramer’s latest book is called Jim Cramer’s Get Rich Carefully (Blue Rider Press, 2013). In this interview, he talks about how he got started in his career from Goldman Sachs to CNBC, the investment mistakes people make (including his biggest mistake), how movies like The Wolf of Wall Street have impacted the financial industry and his best career advice.

How did you originally get started with stocks on wall street and then shift to CNBC? Would you ever go back to the wall street days?

I got my first exposure to Wall Street from my internship with Goldman Sachs between my second and third year of Harvard Law, summer of 1983. The chores were incredibly difficult—I was hired by sales and trading but rotated through every department and fell in love with research while working in the Securities Sales division helping wealthy individuals and small institutions. I enjoyed helping people invest and had terrific success at gaining new clients and making them money—aided, admittedly, by a tremendous bull market – but I wanted to work for myself and I went out on my own to start and run a hedge fund—something that was highly unusual those days—no one left Goldman Sachs!—but was thrilling for me. I had a terrific 14 year run. I always loved journalism, wrote for The New Republic while at Goldman Sachs and then helped found Smart Money while I was at my hedge fund.

In 1996, I came up with a template about how to do a web version of Smart Money and when Dow Jones didn’t care for it, I decided to back it myself while at the same time becoming the Bottom Line columnist for New York Magazine. The website became TheStreet.com. ABC News took an interest in the site and liked my New York Mag column and asked me to appear on Good Morning America a couple of times a week to talk about the economy and personal finance. At the same time I installed a television in my hedge fund office and became mesmerized by how great CNBC’s Mark Haines was. Never missed a minute of him. Could not wait until he got on. I used to sit there and argue with the television and wish I could tell him what I knew and we could debate each other. Then one day I shot him an email picking a fight with him. He gave it as good as I did and we went back and forth and finally he asked me to come in as a guest host. I protested at first—bald, opinionated guy who weighed 30 more pounds than I did now. But he persisted and I ended up having a great time and that’s how my relationship with CNBC began—1997. I miss Mark every day. He could really be a cantankerous contrarian but if you did the homework you could sway him. I loved and lived for swaying him.

I have no desire to go back to Wall Street. I love what I do now!

What investing mistakes does the novice investor typically make and what advice would you give them to prevent those mistakes?

I know it is cliché, but people genuinely do buy high and sell low. They do that because they don’t know what they own or why they own it and they get too excited on the way up and too frightened on the way down. Go look @JimCramer on Twitter. There are always people asking me what to do with XYZ. I always say “why do you own it?” and hit reply to all. Almost no one EVER comes back with an answer. If you know and like what you own and you know the product, have read the conference calls and the annual and the available research and news stories—all online with a keystroke, you should buy when the opportunity presents itself as long as the decline isn’t directly triggered by issues at the company whose shares you own. Instead people buy when things are flying and sell when things are crashing. It is, after all of these years—I bought my first stock in 1979 – very upsetting to me. Preventable losses. Unforced errors. A shame. My current book is about trying to put an end to that. Tall order; but at least I am trying.

Can you name your biggest investing mistake and success?

My biggest failure was buying a million shares of Memorex Telex at $2 out of bankruptcy thinking it can’t go lower. It went bankrupt again and I lost 100% of my investment, which is why I always tell people that a low dollar stock doesn’t necessarily mean a buy and you should never justify buying something by saying “how much can I lose” because you can lose it all. Thank heavens stocks stop at zero. I would have ridden that piece of junk to minus 5. The company told the most compelling story but its technology was simply outmoded and, in the end, there was nothing there. My biggest investment success was Apple, at $50 because my youngest asked me for a second iPod after I had already given her one and she said she needed a different color because they were fashion accessories! I know I had something big from that moment on. I love listening to my kids. They give me many of my best recommendations: Apple, Netflix, Google, and Facebook when it got hammered.

What impact do you think movies like Boiler Room and The Wolf of Wall Street has on the financial industry? How much of it do you think is real?

I think Boiler Room and The Wolf of Wall Street are basically about sophisticated forms of stealing and have nothing to do with the kind of businesses I am familiar with or what I like to help people with. But if they keep people from doing stupid things like buying worthless penny stocks, as is done in The Wolf of Wall Street, then maybe they are doing a public service. I think the original movie, Wall Street, captured the greed and temptation correctly and is cautionary in an honest way. But the best movie BY FAR, the one that really did happen, was Margin Call. There was not a SINGLE mistake or exaggeration in that one. It should be required viewing to understand what really did happen in the Great Recession. Sales, trading, corporate finance, compliance, even rocket science, they nailed it all in that one. Bravo, well done.

What are your top three career advice tips?

First, be honest. If you are EVER told to do something wrong, something that if it were written about in the front page of the Times or the cover of Forbes and you would not be proud of it or you would think it even remotely unethical, don’t do it. If someone accuses you of not being a team player because you won’t, quit that day. If you see a crime, report it. Otherwise you are an accessory to it and your life is ruined. Your name is everything. If you lose it, you will most likely never get it back.

Second, like it, don’t just do it for the money. If that’s what you are doing, just working in finance in any form that you don’t enjoy—and there are plenty of areas that might not be enjoyable to you – then have a game plan to get out when you hit some number that provides you with security and don’t stay beyond it. Go do something with your life that you like after that.

Third, if you get rich, and there is a good chance you will, try to give back, not just in charity but create something, a company that can grow. Invest in something new. I have helped start six businesses. Those have provided food, roofs over peoples’ heads and health care. As my late mom would say for creating these jobs: “Jimmy, you done good!”

Dan Schawbel is a workplace speaker and the New York Times best-selling author of Promote Yourself. Subscribe to his free monthly newsletter for more career tips.

Source: Forbes

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