Investing 101 From Cramer

On Friday’s Mad Money, Jim Cramer said that not all Wall Street lingo is “gibberish” and “deceptively complicated.” Cramer went on to explain the differences between investing and trading. Though these terms are often used interchangeably, they are vastly different from each other. An investment is made for the long haul, while a trade equates to any stock purchase meant to make a fast buck. Mixing these two can cause “serious” damage to one’s portfolio, remarked Cramer. Jim further added that one should only buy a stock if market signs indicate events that could drive the stock price north by several notches. A case in point being pharmaceutical stocks, when an announcement of positive clinical trials helps the prices climb. The biggest mistake people make here is turning their trade into an investment. On the investing front, one is expected to see some short term losses, but that’s “OK.” The goal here is to generate profits over a long term, so short term hiccups are part of the script. Should the stock price rise in the future, the trick is to cash on the rise and not exit the field. Cramer cited his mistake when Apple AAPL was trading at $26. Cramer cashed out at $31. His price target for AAPL is now $300! AAPL is trading at $251.50, up 0.75% in pre-market.