by Guest Blogger on 2012-06-25 24

Do you think Jim Cramer knows what hes talking about?

Jim Cramer is a controversial financial guru who has written columns for several financial publishers and who has found success with theStreet.com, where he is a founder. Despite his celebrity, hes been raked through the coals in financial message boards and other sites. Still, hes managed to draw me in as a follower, thanks to some of his insightful teachings and to the entertaining way he presents them.

Stock Tips From Jim Cramer

There are legions of people who swear by Jim Cramer and I am one of those who finds value in the advice he offers stock pickers. Take note that these tips will apply more to those investors who have decided to dedicate all or part of their portfolios to individual stocks. Here are a few of Cramers tips:

1. Do your homework! Cramer believes that you shouldnt be in the business of picking stocks unless youre willing to do at least one hour per week of research for each investment you own. For this reason, he recommends only owning as many stocks as you can keep up with, using that hour time frame. I think a lot of people blame the market when they should be blaming themselves for not being involved enough in their portfolio. For those who dont have the time nor interest in managing their portfolio this way, then youre better off with passive investing strategies.

2. Buy and sell in increments. Dont try to call bottoms or tops. Buy in smaller amounts as the stock price goes down and sell in increments when the price goes up. Dont buy and sell all at once.

3. Dont care where a stock has been, only where its going. Never look backwards. Just because a stock has been at a certain level doesnt mean it will go back there; it also doesnt mean it could never go back there. Analyze a stock carefully and get a feel for where its going using stock charting tools and research; dont buy based on emotion or based on recommendations from unreliable sources. Just because a stock is at cheaper prices now relative to what its been in the past, doesnt mean its the right stock to buy.

4. No more than 20% should be speculative plays. Everybody wants to get rich quickly which explains the love so many people have for speculative stocks. Cramer says that 80% of your portfolio should be in the best of breed stocks in the best sectors. Only 20% should be those stocks that arent proven yet. Depending on your stomach for aggressive investments, Id adjust that 20% limit accordingly. You may find it more comfortable to keep 5% or less of your portfolio in speculative areas.

5. Dont fight the big guys. Hedge funds, mutual funds, and big money investors move the market. If you try to invest by going against them, you will often lose money.

6. 50% of a stocks upside or downside comes from its sector. Hence, pick a strong sector, then pick the stock within it.

7. Instead of investing in emerging markets, invest in domestic companies that do business in these markets. That will mitigate your risk but still give you the exposure you want in these developing markets.

8. Stay away from overhyped stocks. If a stocks been pumped and has seen notable price inflation, its time to take a step back.

9. Dont buy all at once. Keep your powder dry. Dont purchase your entire position in one fell swoop. Pace yourself and buy in increments to take the emotion out of investing.

10. How much homework should you do to track a stock? Before buying a stock, get comfortable with it, watch it for a while and get to like it. Thereafter, devote one hour a week on tracking it and keeping up to date with the company behind the shares. Its best if you like the stocks you buy; otherwise, keeping up with the stock on a weekly basis will be a chore.

Im actually a member of Cramers Action Alerts Plus service and love Jim Cramers market analysis. Im able to keep tabs on stocks that he recommends through this service and Ive personally found it useful. I also feel that this investment guru caters to the average person (or tries to). Since most of us dont have the resources to do the research work ourselves, I do appreciate that Cramer is out there supporting the average investor.

If youre interested in subscribing to Jim Cramers Action Alerts Plus. you can check out a 14 day free trial to this service by visiting this link.

Jim Cramers Mad Money Insights

This guru has also written a few books on money around the mad money concept. According to this comically caustic and controversial stock picking celebrity, Mad Money is what you call whatever money you are left to invest with, after paying off your bills and funding your retirement.

He discusses stock picking strategies that may be more along the lines of trading. Cramer claims that his tips are for traders and investors alike, although Cramer doesnt seem to be as keen on buy and hold. Check out these rules he shares with his followers:

1. Theres a market for everything, pay attention to how they work.

Theres a market for everything, including newly public stocks, penny stocks and so forth. Theres that encompassing market over and above the smaller markets for various industries, and the performance of a stock is influenced by all these moving targets. Its not just about the fundamentals. The supply and demand of the stock itself can affect its movements.