Investing your money is perhaps one of the most common pieces of financial advice out there. It's a way to, as Wells Fargo says, "put your money to work and potentially build wealth." Despite -- or maybe because of -- its importance, there are a whole lot of rules and books that have sprung around the practice.
And Jim Cramer, infamous host of CNBC's "Mad Money," has finally revealed two of his biggest guidelines to the investing world, rules that he developed after some hard lessons.
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Cramer's Number One Rule
Cramer's first rule is one that he has said many times before: "Bulls make money. Bears make money. Pigs get slaughtered."
"So often in my business, I've seen moments where stocks went up and up so much that people were intoxicated with their gains," Cramer said. "They thought they were geniuses. However, it's precisely at that point of intoxication that you need to remind yourself that you don't want to act like a pig."
In other words, don't be greedy.
"How do you know when you are being a pig? The Nasdaq more than doubled from March of 2020 to November of 2021," Cramer said. "If you didn't feel greedy up there, you didn't need investment advice, you needed a psychiatrist. If you let your winners ride, you gave a lot, if not all the money, back."
Tied to this rule of ensuring you're not being greedy is his reminder that the stock market is never a certain bet. If it was, everyone would invest. With that in mind, Cramer said, it's important to take a profit before you lose everything.
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"Have you taken any profits, have you booked anything, or are you being a pig? You never know when the stocks you own are going to crash. You never know when the market could be wiped out," he said. "The stock market doesn't let you have certainty."
Cramer's Number Two Rule
Cramer's second big rule is something of an addition to his first one: "It's okay to pay the taxes."
"No one ever likes paying taxes, but they are unavoidable," he said. "So many times, people have gigantic gains but they simply refuse to take any profits because they don't want to incur taxes that cut into their winnings."
