This week, The Simple Dollar takes a look at Jim Cramer’s Real Money. Cramer has made a huge name for himself in stock picking punditry and he claims to reveal his methodology in this book. Is it worth reading? Let’s find out.
In the past, I concluded that Jim Cramer’s success was due to the entertainment factor. I had never heard of him before tuning into his show on CNBC, where his … enthusiasm for picking stocks seems to know no bounds. I generally concluded that he was a cartoon figure and left it at that, but several readers of The Simple Dollar said that he says a lot of things about individual stock investing that are well worth paying attention to.
Thus, I’m reading Real Money this week. The book promotes itself as a guide to sane investing in an insane world, which feels like an ironic title if you’ve ever seen Cramer’s show. In fact, the book is written at an incredibly frenetic pace. The information is thrown at such a rapid pace that, as I was taking notes on the book, I found myself filling a lot of pages with information.
This book is a big success if you take one fundamental point away from it and let the rest just build upon that point. What’s the fundamental point? Don’t buy and hold, buy and homework. Cramer doesn’t expect you to spend five minutes a week on your portfolio; instead, you should spend an hour a week per stock investment. If you can’t commit to that, go buy a mutual fund and don’t lose your money in individual stock investing.
To tell the truth, to really analyze all of the stuff he says in this book, you have to spend a lot of time actually doing the homework to really understand all of the principles. For instance, he spends about eight pages discussing the cyclical nature of the stock market and a general logic underlying when you should invest in certain sectors and when you should sell stocks in these sectors. You can read it in about ten minutes, but it would take hours of analysis to really understand it.
It is this “compressed” feeling that really makes the book feel frenetic. There is a lot of information jammed into these pages, enough that you could easily analyze the teachings of the book for months. Thus, if you actually follow the fundamental principle – buy and homework – then you can’t just blindly follow the rest of the book.
Is it worth the commitment? This week, I’ll discuss just a few of the sections that really piqued my interest when reading Real Money and look at them with a bit of detail. Tomorrow, we’ll get started by looking at Cramer’s advice for the beginning individual stock investor, a class that I would include myself in.
Jim Cramer’s Real Money is the twelfth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.