Caller (8:02)

Hey, Jim, thanks for taking my call.

Jim Cramer (8:04)

Of course. What's up, Dave?

Caller (8:06)

Jim, I'm an older retired investor who's moving most of my stock portfolio gains into t bonds and CDs. What are the advantages of bond ladders and how do those work?

Jim Cramer (8:18)

Well, I mean, I. Look, I think that you. What I like about a bond ladder is it's. It would normally matter a great deal. The yield curve is so flat. I'm trying to think. It really doesn't make people want a ladder bonds right now. It really doesn't make a lot of sense. I want you to stay short. No reason to go out in the long end. And you can just keep reinvesting like that. But I also want. I'm not sure of your age, but I always want people to remember that. I think you don't want to bet against yourself and put too much money in bonds because stocks still represent the greatest opportunity. And don't forget utility stocks. They can play a role too. They could have multiple years of goodness. Let's go to Philip in Michigan, please. Philip, what's up? Philip?

Caller (9:00)

Hey. I wanted to thank you. I've been listening to your show since 2006. One of my coworkers turned me onto the show and you've made me all sorts of mad money.

Jim Cramer (9:11)

Oh, fantastic. Thank you for that. Thank you.

Caller (9:14)

I'm also a member of the cmb. I enjoy tuning into you every day and listening to you there as well. Okay, my question is so I know that you refer to dividend reinvestment as the eighth one of the world and I'm totally there with you. All right, my specific question is should I involve myself in my brokerage drip program or should I take the cash and then put it back to work in a stock?

Jim Cramer (9:41)

No. I am a huge dividend reinvestment plan person and as a matter of fact, I wish there weren't an alternative. But for my Chapel Trust I have to send the dividends out and it has really hurt my long term performance. You can't. You've got to reinvest and that's where some big money can be made. One of the biggest things I learned from getting interested in the stock market early is that it is a long term contest. The earlier you get in, the more you can potentially win over the long haul. On My Money Tonight, I'm giving you an inside look at how I got to where I am today, from growing up to Goldman Sachs. Along the way, you'll learn the best practices I learned about the market and how you can incorporate these life lessons yourself. So stay with Kramer.

Mad Money Announcer (10:24)

Don't miss a second of Mad Money. Follow imkramer on X. Have a question? Tweet Kramer Madmentions Send Jim an email to madmoneycnbc.com or give us a call at 1-1800-743, CNBC. Miss something? Head to madmoney.cnbc.com this episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts. With the President pressuring the Fed to cut rates and the outlook uncertain, how will the Fed balance the threat of lower growth and higher unemployment? Fed Chair Powell's message to investors Power Lunch Wednesday, two Eastern and streaming on CNBC plus Foreign.

Jim Cramer (11:37)

Welcome back to a bizarrely special Man Buddy where I'm teaching you life lessons in investing from my wife. While I'm not a dollar sign represented by a man or a stock symbol for that matter, ticker J I M, I've stumbled around the stock market long enough to learn a thing or two. So tonight you're getting some of the wisdom from the school of hard knocks that I've enrolled in. And pass. Don't you always look love it at the beginning of a pro football game where they had the player say his name in a school and some say school of hard knocks. Well, that's what I attended when it comes to stocks. And you are getting the made for TV version right here, right now. For law school, I went to Harvard, though we covered how I first got involved in the market. My fourth grade obsession with keeping a ledger to track stocks and then only learn how they trade through the greatest game on earth. No, not Monopoly, but stocks and bots with its little certificates. His game board is cards about news that would set a stock higher or lower. I love that game. I left the stock market games behind by the time I got to middle school, which we called junior high. Back then, where my obsession became sports, I was the second fastest guy in the school forever. So I ran track. And then of course, girls who my teenage self found far more mystifying than the market maybe still do. Anyway, that's the subject of a different show entirely. However, my father did ingrain in me the desire to save money. Early on I learned that even in high school I saved as I bus tables at the old Block and Cleaver, which of course we called the block and Cleavage because we were really funny and we were at the height of adolescent humor. I stayed more working as a vendor at the old Veterans Stadium, selling first cold soda, then ice cold. That's. I did it. Hey, ice cold. I got ice cold soda. Then only graduating to sell an ice cream. Hey, I got ice cream. Vanilla and chocolate. Very quickly I learned the value of market power, specifically cornering the market. And I paid people to give me the exclusive right to sell ice cream. Hey, ice cream here on the 600 and then on the 700 level, which I own by keeping everybody else out of it. Imagine how much money can be made if you had the only franchise the whole upper deck. Well, at least it's the upper upper deck. Even for a team as horrible, some Phillies who've won almost no games. I made fortunes. Except the one time they gave me strawberry ice cream. Talk about having to run from a customer after they sold you sold them that stuff. Or when Steve Carlton pitched because left he was on the mound, he got fired out so fast that I got stuck unsold ice cream. I had all the straight strawberry. You can't take it home real bad. You had to buy it from the company before selling it. So I take a beating whenever Carlton was on the mail. That's a business lesson. Talk about learning how business really works. The shelf life of ice cream on a hot July night after the ninth inning is about as short as short commit. By the way, during the lightning round, I might jest with you about your name calling you. Hey, skipper. Hey, Captain. How you doing, Chief? I learned these names at the ballpark. It's what people called me to get my attention to buy ice cream. Hey, chief. And frankly, I loved it and its bizarre intimacy. And I never forgot the monikers, buddy. I mean partner. And that's why I use those terms on my money. Anyway, I made a ton of money at the advice of my father. I opened an account of Fidelity with the Magellan Fund. I contribute a little every week. It was the pop top for mutual fund of its time. Run by the great Peter lynch, who's written two investment books. One up on Wall street and Beating the Street. Still available on Amazon. They are fabulous. Get them. I didn't save enough when I got to college. The money paid was work study anyway. And it went toward my tuition room book. But when I got out of college and after multiple attempts to get a job in the newspaper business, I was rejected by 57 papers. I still have the rejections. I saved every one of. I hate everybody who rejected me. I landed position as a general sign reporter. Tallies Democrat crap. Making 160 bucks a week. 150 bucks a week was not a lot to really kind of. Well, anyway, I still have a tattered pay stub. I've got it in an old wallet to remind me of how hard it was when I got started. Nevertheless, you know what I still saved. I put a few dollars away when I could. A few dollars? I mean, like maybe $4. Not that long after that, I applied and got a job at the now defunct Los Angeles Harvard examiner. That was a horrible job, paying $179 a week. But as you can imagine, Los Angeles more expensive than Tallahassee. Soon after my sojourn began in Los Angeles. I found this terrific bungalow apartment in what was known as the Fairfax district, right near Canters. Pretty sketchy. Around the corner from Pioneer Chicken, which was way too expensive for me to go to. Few weeks later, I was stalked. My place was broken into repeatedly. Something the cops were helpless to stop. At the same time, I was assigned a story in San Diego. A horrible shooting. And when I returned, everything was gone. Everything. Everything I had, including my checkbook. Of which of course was cleaned out. So it began. My terrible but thrilling six months of living in my car basically trying to get by. While my ultimate goal was to save enough to get an apartment. I was living hand to mouth and people would take me into now and then so I can get a shower. That's really. It's really important we live in a car to get that shower or maybe even a good night's sleep. But you know what? I never quit saving. I remember cashing my paycheck every other week and then writing a check. Yes to Fidelity. Be jolly fun for what I could afford. You only have your gasoline, car insurance and food expense if you're living in your car. To saving on homeowners insurance by the way, which is very expensive back then news to say it was unsustainable when I only came down with mononucleosis. And then the attendant joined a sliver yellow spot about the size of Greenland yelling those Mercator projectors on my stomach. I had no health care. The HMO my newspaper belonged to had no branch where I was at last station when the company mercifully put me on the road so I could at least submit some expenses for my day to day. So I had to go to a migrant farmworkers clinic to get fixed up. And I still put money away even then. Even as I was making my weekly trips to the doctor was one of the best I've ever had. But the upshot of investing is this is a challenge. The whole story is a challenge. And this is what it is. If I was living in my car and I invested. I never want to hear that. You didn't see. Never. That's why I went through this amazing with the Magellan fund back. Back then I was giving money to the best stock picker of all time. Fast forward 35 years later and enough take advantage of one of the greatest bull markets in history. Magellan money ultimately amounted to a fund well into the six figures. Not because of my additional contributions which remember only just a few dollars a month. But purely from capital appreciation. The power of compounding. I never touched it. Still haven't. I just let it build. I think the takeaway here is that I want you to save no matter what the excuse. Obviously the earlier the better through thick and thin. Listen when CBC has those all star managers on. Keep your ear open. If you don't have enough money or handle or handle the time to own stock portfolio you can only own one or two stocks. Send the money in as little as you can to an index fund to a mine up to one of these big mutual funds. If you need help managing your own portfolio, join the investing club. I think that's the best way to go. And here's the real bottom line. If I could still send those checks to Fidelity Magellan from when I was living in my car, sleeping in the back, Jack Daniels and a hatchet and then ultimately a yes pistol, sick as a dog joined a sliver, then what's your excuse for not getting started? You can put some money away too. That's the way I was living. They have money back everywhere.

Mad Money Announcer (18:22)

Coming up. Take a trip down memory lane. The hair is gone, but the wisdom tolls on. Stick with Kramer.

Jim Cramer (18:32)

Booyah for the Emperor of Kramerica.

Caller (18:35)

Honorable James J. Kramer.

Jim Cramer (18:37)

You got me jumping around my office right now. Thank you so much for all you do for us. I enjoy your show and I find a very entertaining and informative.

Caller (18:45)

I watched your first ever episode of Mad Money back in 2005 and I've been watching every single episode ever since.

Mad Money Announcer (18:51)

Don't miss Mad Money every night at 6pm Eastern. Plus, join the CNBC investing Club and stick with Kramer around the clock.

Fidelity Representative (19:02)

Don't just ride the index. Seek to outperform it with FELC, the Fidelity Enhanced Large Cap Core ETF. Unlike passive ETFs, FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding. And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms, just like any other ETF. Discover FELC, the Fidelity Enhanced Large Cap Core ETF part of Fidelity's suite of active ETFs. Learn more at fidelity.com Fellowship before investing in any exchange traded fund, you should consider its investment objectives, risks, charges and expenses. Contact Fidelity for a prospectus and offering circular or if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail in index as compared with passive ETFs. Fidelity Brokerage Services LLC Member NYSE SIPC.

Mad Money Announcer (20:03)

A Squawkbox exclusive Legendary investor Paul Tudor Jones, his outlook for the market economy and American exceptionalism. Plus where he's finding opportunities now squawk box tomorrow 6am eastern and streaming on CNBC plus.

Jim Cramer (20:26)

We'Re riding the magical money mystery toward tonight. I'm giving you the life lessons I've learned the hard way through decades of investing. Right now I want to tell you how I got started in individual stock picking, something you know I love and still believe in even after multiple periods of pain, chaos and chicanery. Presumably you believe too, or else you wouldn't be watching. If you're picking stocks playing with real money, not just with a ledger of the game of stocks and bonds, you need to open an account When I got started 1979, there was no such thing as an online account. I had my money with Fidelity courtesy of my Magellan Fund account. So I chose to put my individual stock account there too. When I first began, I didn't know where to look for ideas, so I turned to a magazine. I like Forbes now people. Forbes. Please don't take this personally, but I read a nifty article about American Agronomics, a terrific orange grower in Florida. Seems so compelling that I bought ten shares of it for nine bucks. Week later frost hit, wiped out the crop and my investment was more than cut in half like the plot of Trading Places, an all time great Eddie Murphy made movie if you've ever seen it. Well, what can I say, pretty similar. I was devastated but not defeated. I sold it out, took the Capital and bought 7 shares of Bobby Brooks, a clothing outfit I heard of, which again Forbes said could be a terrific buy. Almost immediately the company reported back quarter my money have to get. Fortunately I had a decent job at a magazine called American Lawyer, which had just started is making 20 GS and living in a less than swank studio on 44th street between 1st and 2nd near the United Nations. The cheap $40 a month rent allowed me to replenish my stock offers pretty quickly. I was on the road quite a bit back then and after a particularly hard night on the town researching a story in Kentucky, I fell in love with the breakfast at Bob Evans Farms, finding out that it was publicly traded. When I went back, I visited that huge fabulous midtown Manhattan New York Public Library, ones with the big lines in front of it and devoured everything I could find about Bob Evans. They had magazines with articles, microfiche, four month old financials, investment publications, occasions with write ups that allowed me to compare Bob Evans with other companies in the industry, which is what you have to do. I knew I had a good one So I bought 20 shares. Stock went up immediately in a good quarter stock split and I figured out the first good component. Investing. Know what you own. What did I know about growing oranges with American Agronomics? I mean I know any about women's fashion. I mean certainly not me, but a good plate of scrambled eggs and sausage After a hard night on the table that serves an attractive setting. Good service, nice enough growth plant. A big plan to expand the Midwest. That was for me. Next up, SPS Technologies. That's the old standard press steel and out from my old hometown that made faster screws for airplanes. Something that how Met now dominates YSPS because a buddy of mine from high school catching up with me told me that they were hiring. Like man, if I was looking for a job paying good money, well, I already had a job. But back to the library for more research. Solid company, no debt, but nothing in print about its hiring push. Wow. Ripe for a trade. SBS doubled not long after and I caught the bug for good. 23 years later will be acquired by Precision Task Force, the preeminent supplier to aircraft builders around the globe. Before PCP went on to sell itself to Berkshire Hathaway in 2016. Good bloodlines. So now I'm figuring it out. The best investment ideas come from what you know, melded with information gleaned from public sources. Even if there is late and as hard to access as taking a surreptitious trip to the Europe library. When I was supposed to working, I didn't like the random way I was making money. A friend from home's lucky call about jobs available at Sports Technologies. A hearty breakfast at Bob Evans Farms. I mean I figured that'd be a more rigorous approach. Right then it hit me. Look around at work. Stupid. At the time I was covering mergers and acquisitions, looking at the lawyers who do the deals, profiling some following the deals they were on. It seemed like every other deal was in the oil patch. One after another smaller mid sized oil companies were being acquired and all I was doing was standing around writing about them. So I went back to the library, took out some editions of the thing called Value Line Stock Research magazine and checked out the pages devoted to oil companies. Then of course referenced them with other research. Find out which ones could be acquired without problems. Either because they were publicly traded without a family owning them or because they seem to be fit the size the parameters of so many other deals. So I settled on this thing called Natomas, an oil company with a real gusher in Indonesia. Oh, I didn't have long to wait. Car McGee struck bottom almost double my money. Another lesson learned when I takeovers buy companies that would do well on their own. The Thomas was, but it was under managed, which was the consensus I found by reading the articles about the oil enterprise. That meant another oil company with bigger scale could do more with the Thomas which was cheaper than it should be if it simply got rid of the existing management. As much as I hit some winners though, I was distraught that I'd given up the ghost in those first few trades. At the time I've been hanging around the track on weekends, mostly Aqueduct nearby. And I learned how to handicap by reading the books of Andy Byer, the legendary horse horse racing writer. He is something. Okay, buyers Picking Winners is among the best investing books ever written. Even as it's betting on the ponies. It teaches discipline, how to identify the best thoroughbreds to bet on, how to find the best long shots going to the out of the way tracks where information was less well known. Not betting willy nilly on every horse in each race. Find the ones where the payoff was more sure and bet big. Cut your losses if you're having a bad run. Every one of these lessons could be applied the stock market, right? I mean, you'd swing when you know what you're doing. Particularly when others don't want a less well known stock out of the way track. Don't just gamble stocks for the excitement of it. That is foolish. Most important, be disciplined. Don't let your losses pile up. After five years of professional journalism, I decided to hang it up and go back to law school. The good news, I saved enough money to pay for my first year on the stock market. As I never would have had enough money to cover the cost of it. I just kept my money in a savings account. So here's the bottom line. You want to get started? Go small. Invest what you know, research intensely. Just research, research, research. Back then I got old data from public library. Now it's as simple as a keystroke. And the information is free, including up to the minute financials, analyst presentations, brokerage research and of course the conference calls that I tell you are must if you want to actually know what you're doing. Simple, no? Lucrative. You bet it is. Let's go to Michael in California, please. Michael.

Caller (26:09)

Yes, Jim. First of all, thanks for taking my call.

Jim Cramer (26:12)

Of course.

Caller (26:13)

I'll try and make this as quick as possible. I know you got a lot of people help here. This has to concern my two children. I inherited recently quite a deal of money. Not a million dollars, but a substantial amount. And I'm looking at a 20 to 30 year time frame here. I've been investing for them since the day they were born. They're doing all right, but I want them to leave them some good, good money. I'm thinking on the lines of Berkshire B. And now this is putting all this money Berkshire B& ETF A, Vanguard ETF or some of that, somewhere along those lines. What's your opinion?

Jim Cramer (26:54)

Okay, I think that S&P 500 fund and the total return funds are both really good for that kind of situation. Vanguard's total return. The one thing I would caution is as much as I like Warren Buffett, I just think that you have to beyou have to have kind of a basket if you do one stock. But if you do the ones that I just mentioned, you don't need a basket and you don't have to keep track of them every minute. By the way, if they're young enough, maybe you give them something that they actually want to spend some time learning about and that could be good too, to keep them invested and interested in their money. But thank you for those kind questions. And let's go to Loyal in Arkansas. Loyal, yes, sir.

Caller (27:29)

How you doing, Mr. Kramer?

Jim Cramer (27:30)

I'm doing well. Loyal, how about you?

Caller (27:33)

I'm doing all right. I want to know, getting back into the market with 11k, what's the best way to have a long term, a long term goal but get a short term return within a year or two on your investment?

Jim Cramer (27:49)

Well, you know, that's, it's too risky. Frankly, I, at one time or another I think in my earlier years I would have suggested call options and then also some longer term stocks and mutual funds. But these days I'm just against the short term stuff. I can't deliver and I don't want to encourage trading. But thank you so much. I wish I could do better for you, but it's just not my thing. Trading thing is not my thing. Anyway, if you want to get started in stocks, go small, invest in what you know and research intensely. The process may not be simple, but for it can be lucid. I have much more mad money head, including an inside look at what I learned from my time at Goldman Sachs. Plus I'm taking your investing questions with my investing club colleague Jeff Marks. So stay with Cramer.

Mad Money Announcer (28:37)

Coming up, how has investing changed since Kramer's hedge fund days? We count the ways and the answer may surprise you. Next.

Caller (28:50)

Good evening, Mr. Kramer.

Jim Cramer (28:52)

Thank you.

Caller (28:52)

Thank you for everything you do. You've been such a wonderful source of information with your teachings. I have to say thanks.

Fidelity Representative (28:58)

Thank you for all your advice and.

Jim Cramer (29:01)

Saving us from ourselves.

Caller (29:02)

Your advice let me quit a job that I hated. I love you to death. Thank you for everything you do. Thanks for making us money and more importantly, thanks for keeping us from losing money.

Jim Cramer (29:26)

Tonight's show is all about you learning from my attendance at what we call the University of Financial Hard Knocks with a major investing I've taken you through the importance of getting started early saving no matter what. I've shown you how to spot winners, avoid losers, stay disciplined over through looking at my actual examples in my life now I want to give you a sense of how you can become a trader. Oh here we go. A good trader and I don't normally recommend this stop the direction I like to take the show that money has changed time and time again after the first few years I've delivery scooted away from trading and trading ideas and much more toward long term investing. And that's because there's so many more obstacles to trading than investing these days. When you're a trader you have to watch your positions like a whole during the day to the point where it's very hard to do your job. Follow the market. There are so many people with such a great set of tools and the ability to access information real time. There are so many different products that allow hedge funds to move stocks around like toys. It's very hard to compete against them. What you can't do the one on one, especially when you're doing it part time. But there's some advantages you have now that you sure didn't When I started trading in my law school Dorm back in 1981 and I was trading, not investing. First, commissions are non existent for home gamers so you can get in and get out without much friction. Your broker doesn't even take a fee. Second, the information you need is on your personal computer or even your smartphone. Back in the day I had to call brokers and watch the ticker on fnn precursor to CNBC by the way. And third, trading is lightning faster. Back then I didn't even know what price I paid for stock or when I bought it. Market order, whatever. When I was in class I had to use payphones. No sell. You often had to wait at one payphone in the classroom building while some kid chatted endlessly and aimlessly to his girlfriend. Maybe someone called Mom. At the time though, I had to go with what I knew. I knew individual stocks. For all the stories about Harvard Law School, including the movie Paper Chase, I can tell you there was tons of downtime at law school and terrific business school library that had a lot of sell side research. That's the stuff the brokers turned out along with up to date micro fees, quarterly reports. Those who are too young remember Microsoft. They miniaturize everything to a little piece of film and then you had to read it through a machine that was basically a glorified microscope. All things considered, I possessed the best publicly available information at the time for a student that you get in the early 80s. The first thing I decided to do though, given the circumstances, was to work on finding one training idea per week. My reasoning was pretty simple. You can't be all over the map if you're doing this as a hobby, even a time intensive one. I figured I couldn't take a lot of chances until I really knew what I was doing. A very valuable lesson if you want to start trading. I discarded a ton of ideas looking for stocks that had catalysts, upcoming reports or possible mergers and stock that could rally based on the other parts of the newspaper. An article on the front page might be talking about some breakthrough in medicine. A brokerage report might discuss the potential for a new oil fund. I got on a roll and I started my first writing about the market. It was a newsletter called Mr. Bullish, which I mailed only to my parents once a week since no one else cared about what I thought. And it clearly articulate the thesis by any trade I did, I did not trade. If I couldn't explain exactly what the company did and why I liked it and what would happen to the to the stock. What was the catalyst to buy? No buying of anything. It didn't have a clear exit strategy from the moment I put the trade on again. Important lesson made discipline by the insistence of written thesis before I pulled the trigger. When you trade, you've got to trade with confidence. Otherwise you can easily be shaken out by the broader market. You want to trade with confidence? Well, ask yourself. Would you be willing to put a stock recommendation on your voicemail? Yeah, we used to have those and updated every week. Well, at that point it was a quarter. It was something like this for me. Hi, this is Jim Cramer. I'm not here right now, but I like monolithic memories at $32 ahead of the next quarter. Yeah, I actually did that. That's the level of conviction I had about my picks of the week. Of course I was putting my money where my mouth was. Managed to augment the winnings with work I got from my old employees. American lawyer. There was some freelance work for the New York Times and some legal work for a professor who moonlighted during doing these criminal defense cases. He's kind of a famous guy, but won't go into that. It wasn't before long that a fellow by the name of Marty Perch at that point, the publisher from the New Republic, also professor teacher at Harvard, tried to get me to write a piece. I neglected to call him back, so we inadvertently got three weeks worth of trades for my answering machine, all successful. And he told me to meet him at a coffee house nearby. When I did, he said that he made more money for my answering machine than he had with years of professional money managers and he wanted to give me a half million dollars to manage. I said I didn't think I was capable of handling that my own. He said he had confidence in me. And shortly after, when we have a cup of coffee, pulled out a check for a half million bucks. That was real money back then. I ran out of Fidelity with the money and set up an account and went right to work trading. Almost immediately I lost a ton of it. And I. I could see how I might have to watch this is Mornings House. Me mows lawn for about like 100 years to make back the 70 G's I just blown to smithereens. My mistake. As clinician told us in that seminal movie Magnum Force, a man's got to know his own limitations. You see, you can't trade a huge chunk of money all at once. Total violation of all my weekly discipline. Right. Can't put it all to work at once. You had to do some. So you do that. If you've done a huge amount of work, you had to have a chance to pan out an entry point. You had to come up with a reasonable entry point and an exit. In other words, you had to know how to trade. And I didn't. And I had no discipline. I had violated my own rules and I blew it. I confessed my sins to Marty. He said. I said, please take the money back. Instead, he wanted me to have more money, betting that I'd learned my lesson. You know what? He was right. I reverted to my old style, trying to be right about one idea at a time, keeping the rest in cash, doing a huge amount of homework, going big when I had the most conviction, the way any good trader would, I slowly but surely made it back. While I also paper invested a more active but not truly trading portfolio to get a better feel of things. That would become the beginning of my actual professional investing career. And we made a huge amount of money together. Don't mind saying that. So here's the bottom line. If you're trying to trade, make sure you have a catalyst and exit point where something's supposed to happen and then get out of the stock. Even if the idea doesn't pan out because you're trading, not investing. You need conviction and you have to ask yourself, would you be willing for the world to hear, hi, it's me. I'm not here right now, but I want you to take a big swing at Disney ahead of the analyst meeting. If you can do these things, start small, give it a try. Net money's back. Boya Jim, I love you man.

Caller (35:44)

I've been watching you from day one.

Jim Cramer (35:46)

Thank you for all the wonderful advice that you provide us. I'm learning so much watching your show. Watch your program every day, live. Love it. Always wanted to say booyah on your show. Thank you for being the greatest in the world. We consider you the money market maker and we thank you for all you do.

Caller (36:01)

I love your show a long time.

Jim Cramer (36:03)

Fans your show and we think it's the most entertaining program on tv. Welcome back to this special edition of Mad Money where I've been teaching you life lessons in investing from, well, my life. Now we're up to the professional grade. When I started at Goldman Sachs, I've been quoted by Goldman for three years before I got a job in what was then the security sales department, helping individuals and small institutions manage their money. I got a ton of those history from those years. And if you want to know more about it, I suggest you read Confessions of a Street Addict, my autobiography. But tonight's show, like every show, is about learning how to trade and invest. So I'll dispense with the anecdotes and try to teach you how to make money from the events that transpired from my time at Goldman. First, that's when I began understanding the process of actual money magic, the ability to build a portfolio from the ground up. And I had the best teachers in the world. One of the great hedge fund managers of our time, Lee Cooperman. He was the research director at Goldman and he put on investing clinics almost daily. But you know, I learned most from my customers, chiefly wealthy individuals from all walks of life. At Goldman, I learned something that to this day can't be understood by so many professionals in this business. Individuals can and do beat the market quite regularly. I have what's known as non discretionary accounts, meaning that I wasn't allowed to invest anyone else's money with my own ideas unless I could win them over to make the purchase. Remember, I was on commission and made money only with the buys or sells I could convince people to act on. That's where I learned how important it was to talk over a story with an individual and be able to articulate it in a way that made sense to them. Can you do that to someone when you're picking a stock? You had to know your stuff. I often ask my clients questions about whether they knew enough about the stocks that they wanted to buy. I wanted them to be as educated as possible too. That's because I knew that if the stock went up, it would be their idea. But it went down, it'd be mine. Come on, that's human nature. What else did I learn? How about humility? It was at Goldman Sachs that I first figured out how humbling this business could be. The great 80s bull market had just started not long before I'd been hired. Almost all stocks had tremendous tailwinds. But when one of your ideas went against you, you had to get on the horn and explain either why the person should buy more or why they should cut their losses. I also learned to let your gains run while you cut those losses. I learned the hard way. Many of my clients were terrific business people who didn't really know that much about stocks. They'd just been fabulous at running their own enterprises. I had a real Kentankerous client, a real estate tycoon who I worked hard to get. Trying to win him over for ages. I told him I'd be judicious, work hard and get it right for him. He said he didn't want trades, he wanted long term investments. At the time, I happened to like the stock of Kimberly Clark. I told him that I thought this one would be a terrific addition to his portfolio. He agreed and I bought him 1000 shares. Almost immediately the stock went up 8 points. Oh, I had a winner. So I called him. I said, bob, I want to ring the register and sell the 1,000 shares of Kimberly Clark. I thought he would thank me, but he was furious at me. He told me that I had said that Kimberly would be a good long term position position that it could have great gains over time and that he wasn't the least bit interested in only making $8,000. Then he questioned my integrity and wanted to know if I was churning him a horrible charge. Meaning I was just trying to generate commissions off his account. You know what? I was scorched. I was burned. But it taught me a terrific lesson. Just as you don't want to turn a trade into investment because that's usually a sign that you're embracing a loss and trying to invent reasons to stick with it, you also don't want to turn an investment into a trade. When you have a good one. Let it run for heaven's. Sake. Bob was right. Tip. The clock already doubled and I was vindicated despite myself. Finally, I learned the science behind building a portfolio and understanding how to create long term wealth. A lot of my business involved contacting people who just came into a great deal of cash, either through inheritance or through the sale of a business. I regarded my first job as listening to their needs, trying to figure out what they wanted. Were they conservative? Did they want capital preservation? Were they aggressive? Did they want capital appreciation? I tried to get them get to try to get to know them and urge them to get to know themselves. Just as you should know yourself. Can you handle the pain of a market decline? Would you prefer your money to appreciate slowly? Get most of it from fixed income, meaning bonds, or from dividends. Do you want to participate in new issues? You want to try to hit it out of the park with some of your capital? Of course, many of you're familiar with these lessons. I know that you've heard me say them time and again on air, preaching them constantly to the CBC investing club. I try to teach you how to know yourself to to know what you can handle and what you can't. Finally, this is when I learned the value of diversification. When I first got the Goldman Sachs, the oils were hot as a pistol. I mean, you understand those were different days. You could have an oil company's double and then double again again in a short time. As they struck oil, we figure out, wow, how big those fines must be. So everyone got caught up in the oils. The families I work for wanted oils. I wanted oils for my personal cat. Every day seemed like another great day in the oil patch. Services, drillers, you name it. Then one day, oil plummeted. The sorties started pumping like bad. Some global tensions that had jacked up the prices were settled. Next thing you know, the bull morphed into a bear. Those who own nothing but oil stocks, including yours truly, were crushed. I learned firsthand the concept of diversification. And while occasionally violated some of my rules, I never again intentionally avoided diversification. So here's the bottom line. From my early days at Goldman Sachs, I learned the core principles of investing. Finding solid ideas to build a diversified portfolio to create long term wealth in a way that suits the customer. Consider yourself the customer of this show. Stick with prayer.

Mad Money Announcer (42:00)

Coming up, Wall Street's most reliable tag team squares off to answer your questions. Keep in touch. Mad Money will be right back.

Jim Cramer (42:11)

Booyah Jim.

Caller (42:12)

Your integrity makes you the Booyah Saint of Wall Street.

Jim Cramer (42:17)

Booyah Jimmy chill. Booyah Jimmy chill. Booyah Jim. Quadruple. That's lot of boo. Guys, through this entire show tonight, you've heard me pound the table on how investing in the stock market is a long term contest. Emphasis long term. So you're never too young to start investing, just like you're never too old to learn new things about the market. I love to teach my viewers and also learn from them, which is why I always say my favorite part of the show is answering questions directly from you. So tonight I have Jeff Marks here, my portfolio analyst, partner in crime at the CBC Investing Club. We're going to answer some of your most burning questions, which are always amazing. Frankly, I learned so much. Let's give you an inside look at what we do in the club. By the way, if you're not a member of the club, you can scan the code behind me or go to cnbc.com/investing club to sign up. I sure hope you will. All right, let's take our first question. First up, we have a question from Sandy, who asks. My husband and I are at retirement age. He likes dividend stocks, but I don't like holding them when they lose value and my original investment is in the negative. I prefer solid growth stocks to continue to build our portfolio, keep or sell these losers. Now, I'm going to start by, by telling you right here, retirement age, okay? That's the eye of the beholder. I have been a big believer, contrary to the entire industry and saying there may not be a retirement age when it comes to stocks. I think that people should always be investing for growth and some for dividend and then some for bonds. So my answer to this one is that I, you have to kind of at times take the risk, but you just use smaller amounts of your cap.

Jeff Marks (44:05)

Yeah, I think there's always a balance to everything. Right. One thing I would point out is without knowing the statistics, stock, if the dividend investment is in the red, well, maybe they're not growing their cash flow, their earnings, maybe they're not growing their dividends and that could be a red flag that something's wrong.

Jim Cramer (44:22)

I mean, for instance, you know that we got involved with Foot Locker and their cash flow declined and what looked like a good dividend stock became a non dividend stock. So, Sandy, I think that you, unfortunately, you have to do a level of homework. Of course, join the club and we will point them out. But you can say, listen, we missed footlocker. You're going to miss things. But what matters is I want you to have more exposure to the stocks than people Expect because retirement age may be something that turns out to be 20 years before you need to grow capital for that 20 years. Next up is Bruce in, he's in Michigan and he says how do you set price targets? I am going to defer to my colleague who does a lot of the price target setting.

Jeff Marks (45:04)

Well, look, I think it's an art and a science. Right. There's no one standard rule of thumb to apply. But what I will say though, when looking for price targets, what you can do is look at some historical multiples of where stocks trade at and, and try and figure out how much you think the stock will earn out in the future and apply that. But another key considerations too is that if the company is improving its margins, maybe taking share, then it would deserve to trade at a premium versus its historical levels or maybe at least catch up, so to speak, the multiple rerate closer to some peers.

Jim Cramer (45:40)

Let me ask you, during the great runs that were Lilly and Nvidia, how did you go about setting price orders?

Jeff Marks (45:46)

Well, I mean, look, those are also some of the great momentum stocks of the last couple of years too. So that I would say is a little bit of an art. But again, stocks like that, you also have to look, look out years out.

Jim Cramer (45:56)

Yes.

Jeff Marks (45:56)

In advance too. Especially in the case of Eli Lilly, where it's more towards the end of the decade is where it's GOP1 sales.

Jim Cramer (46:05)

Will, just so people know, we take it very serious. Okay, now let's go to Lindsey in Oregon, where my daughter had her former years, who asked, how do you trip a position? Do you sell shares with the lowest cost basis or the highest cost basis? Well, this is actually, this is an accounting issue. There are rules on what you can and what you can't do. We are just, people know, we send everything out, all our capital gains out and all our dividends out. And we often want to try to get rid of the, of the ones that has the worst basis. That's been our kind of stock in trade.

Jeff Marks (46:41)

Yeah, I mean, look, this is always a question of tax considerations, right? Because if you're taking a profit profit and you're selling a lower tax basis, you'll trigger a higher realized gain. And on the other hand, if it's for a loss and you sell that lower basis, it's a, it's a smaller loss. So it's tax consideration.

Jim Cramer (46:58)

Now, just so you know, my accountant says, Jim, just take it as they come last in, first out. Why is that? Don't ever get in trouble. That's. There's my lesson for the IRS and you. I like to say there's always a moment market somewhere. I promise. Try to find it just for you right here on Mad Money. I'm Jim Cramer. See you next time.

Fidelity Representative (47:21)

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Mad Money Announcer (48:00)

Pressuring the Fed to cut rates and the outlook uncertain, how will the Fed balance the threat of lower growth and higher unemployment? Fed should share Powell's message to investors. Power Lunch Wednesday 2 Eastern and streaming on CNBC Plus.