If you got into stocks any time after the pandemic began you know two things: stocks go higher and investing is fun.
That Panglossian view, augmented by commission free trading, boosted by stimulus checks and complemented by the low interest rates that are hardly competitive, has lured so many younger investors in the market that they are impacting stocks like never before.
I know that what I call the MerryMen, after not just the Robinhood clients, 17 million strong, but all who have been having a ball owning stocks, take pride in their stock picking. There are enough stocks of companies that they know and love, companies like Zoom (ZM) , or Lemonade (LMND) or DoorDash (DASH) and Airbnb (ABNB) , as well as, of course, Facebook (FB) , Apple (AAPL) , Amazon (AMZN) , Netflix (NFLX) and Google now Alphabet (GOOGL) , that are accessible that they have become almost irresistible like candy, or like Crack, we don't know yet what it will turn out to be.
I am so torn on this. I want people to own individual stocks. I am, of course, still a believer that your first $10,000 invested should be in the S&P 500 but after that I encourage owning individual stocks. More important I even sanction speculation for about 10% percent of your holdings.
It's been a remarkable thing to behold. Blessed with an amazing ability to research, starting with Google and helped by so many communities of those who both do work but also cheer stocks, the new investor has it all over those who came before them. I think that many of the older investors condemn these newbies because they haven't paid their dues and don't do real research. To me there aren't dues to pay. Where does it say you must lose money before you make it? And the older people can't fathom how much younger investors really do learn before they pull the trigger.
All of that is well and good but let's go back to the initial premise, that these investors have been blessed with one of the most outright bullish tapes in history. They have surfed the bullish wave and made fortunes.
But now we have to wonder, are we in Maniaville? We see stock after stock in the electric vehicle or hydrogen category or sports gaming or cannabis sectors or the work at home group go higher and they make everyone who owns them feel they have the Midas touch.
But King Midas Markets breed manias and, in part because so many positive stories do end up coming true - think Tesla (TSLA) - manias initially have a lot of adherents who don't want to hear any negatives. Still we can't denigrate anyone who is trying to find the next Tesla because so many were denied that opportunity by analysts who fought it all the way,
So what do you do?
It's actually pretty simple. You call on one shibboleth at all times: discipline trumps conviction. You may think that Bitcoin grows through the sky, or that NIO (NIO) is the next Tesla and or that GrowGeneration (GRWG) is now unstoppable.
I think that's all well and good.
What matters is that if you haven't taken anything off the table, then despite the paper profits, you have made no money. It doesn't count until the cash is in hand.
Now I am not asking anyone to sell out of their positions. I am saying I don't want you to be greedy. I want you to take something off the table just because you don't know how long the halcyon moment is going to last. I don't care if you just take out your cost basis and play with the house's money or perhaps sell a quarter of any stock that's doubled.
I am sure that if you are rooting for your stocks you hate what I am saying. But what I am doing is outlining what allows you to stay in the position without being greedy and with the discipline you need to know because not all of these companies are going to make it.
Remember, I want people to own pieces of great American companies. I want to help you get rich, but to get rich carefully. Prudence dictates taking something off the table. Don't let Jimmy Chill school you on twitter. I promise you, you won't regret it.
(FB, AAPL, AMZN and GOOGL are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
