Jim Cramer's Advice On How To Navigate Market Moves: 'You Have To Flip The Psychology'

Jim Cramer, the host of CNBC’s “Mad Money,” recently shared his insights on how to navigate market sell-offs, advising investors to embrace the downturns. He also guided determining the number of shares to buy or sell and identifying actionable events in the market.

What Happened: During the Club’s Annual Meeting, Cramer and Director of Portfolio Analysis Jeff Marks addressed various questions, including strategies for market downturns and stock-picking for kids, reported CNBC.

“You want to be able to embrace the sell-off and say, ‘OK, it’s going to get me my price,'” Jim said. “You have to flip the psychology of it because otherwise what happens is you play in fear, and fear is not a strategy.”

Cramer emphasized the importance of identifying a stock’s price during declines and strategically purchasing shares at different price levels to lower the cost basis.

“You want to play from strength at all times, but the strength comes from mental strength. Yes, cash can help, but it’s the idea that you’re the coolest person in the room. Let the other people give you your price,” Jim said.

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When it comes to deciding the number of shares to buy or sell, Marks suggested starting with a 1% portfolio weight and then scaling further. He also highlighted the art and science behind the decision to sell shares, emphasizing the need to adapt to changing company prospects.

Regarding actionable events, Marks advised investors to consider the reasons for owning a stock. He cited the example of the decision to exit Humana Inc. after a significant shift in the company’s outlook.

“You have to know when a company is really blindsided,” Jim added. “Humana, they were so blindsided that I lost all conviction in them.”

When asked about adding more shares to a position that has already run far, Cramer advised against buying the stock well above the basis, suggesting waiting for a significant price break.

For young investors, Cramer recommended buying three stocks they like to keep them engaged in following the markets, suggesting riskier, growth-oriented names.

Why It Matters: Cramer’s advice comes amid a volatile market. On Thursday, the Nasdaq Composite reached its first record high since 2021, with Cramer attributing the surge to the continued strength of the tech sector and new inflation data.

Earlier, Cramer had advised investors to look beyond the numbers in financial reports, stating that the current method of reporting is leading to false judgments. He also urged investors to stay bullish amid market uncertainties, highlighting specific companies that have outperformed Wall Street’s projections.

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Courtesy of Scott Beale on Flickr