Top 3 Chapters for Beginning Investors
Since Jim Cramer’s Get Rich Carefully by James J. Cramer was originally published in 2013 and the reprint came out in 2014, I was skeptical about its ability to help me currently because the world has changed drastically after its publication. However, I couldn’t have been more wrong! Yes, some parts are outdated; for example, some CEOs he considers bankable have moved on from their positions. But other than those blips, the book has a lot to offer anyone beginning their portfolio or any investor needing a refresher. Plus, with the market living in bear territory these days, this is a prime moment in your investing horizon to take careful steps to set your investments up so that you can take advantage of the coming bull market.
When you read this book, you’ll be eased by knowing Cramer has your financial back just like he does on his show Mad Money, where he says, “Other people want to make friends, I just want to make you money.” Sounds great to me, Jim!
From the reading, I learned more than anything else, to get rich carefully, it takes discipline, diversification, and a command of your emotions in all stock market scenarios. It sounds easy, but the other best part of the book is that Jim uses his own mistakes to show that everyone messes up, and the ones who say they don’t, they are lying.
Stay Disciplined
The chapter called “Lessons Learned from My Charitable Trust” is the first one that really starts to show the ways to get rich carefully to someone with a limited investing background. Quintessentially, Cramer explains on page 294 that he examined his past with ActionAlertsPlus, and came to the conclusion that “the insights gleaned from the contemporaneous alerts certainly will make you realize how vital it is to recognize that discipline and diversification are really your only friends in such unfriendly markets.” It’s amazing how this quote still resonates today, some may say it resonates louder than ever since we’re in a bear market right now, and like Cramer said, diversification and discipline are the only ways to navigate your investments through the minefield of losses that occurred in 2022.
This chapter is also an introduction of sorts because it and the next two are about the lessons he learned investing with his charitable trust. These lessons are perfect to show an investor at any level the ins and outs of investing carefully to reach your financial goals. Mainly, the reason for his lessons being such a phenomenal teaching tool is because he doesn’t act like he’s perfect, and this is coming from a man who was extremely successful in the stock market business. The best part is that Cramer’s lessons can teach the reader that everyone makes mistakes when it comes to picking stocks. The difference is between who quits and who stays disciplined while pushing through to ride the next bull market.
Diversify Your Portfolio
Another great chapter for beginner investors to read is called “When and How to Sell in the New, More Difficult World of Investing.” Essentially, this chapter covers 10 warning signs for when to exit your position. If you are familiar with investing, the point to exit is always a struggle because it always feels like you’re selling too soon, unless you read this chapter and learn the red flags to trust when they come up. This is also the point where your discipline will come into play since it can always feel as if it’s a damned if you do and damned if you don’t scenario, but you can ease this feeling by following Cramer’s warning signs and acting upon them. One of the best quotes and metaphors out of this chapter that I feel encapsulates using your discipline to exit a position is on page 348, and it reads, “But when the pool is real crowded and there are only a few stragglers left to dive in, don’t overstay your welcome. Jump out, get dried off and ring the register on the whole darned thing.”
All 10 of the warning signs are crucial, but if you could only remember one forever, memorize number ten. The tenth warning sign is about diversification, and how immensely important it is to guard your portfolio from risk, and staying on your path to reach financial independence or any other monetary goals you have. This warning sign is so important that Cramer has a segment on his show called “Am I diversified?” And “when you consider how [he] was ensnared in a costly brush with antidiversification, you can’t think about this issue enough if you are going to Get Rich Carefully… So take your portfolio test today, and if there’s too much concentration that you didn’t know about, take action” (364). Therefore, the importance of diversification cannot be overstated because everyone, from the Oracle of Omaha to the child learning how to invest, is vulnerable to a sudden downturn in a sector and if you’re all-in on one sector of the market, that sudden downturn could ruin everything you’ve worked on to that point.
Control Your Emotions
When you make it to the chapter “Check Your Emotions at the Door,” you’ll be well aware of the importance of discipline and diversification, but it’s emotions that own the last layer of approaching equities carefully because it is emotions that can affect your ability to honestly self-examine your portfolio’s diversification or your ability to stick with your discipline. In this chapter, Cramer shares 12 personal examples of his stock failures due to his emotions getting the better of him. But I think for the beginning investor to the most seasoned investors, Cramer gives all of them some sage advice for when you evaluate yourself and for when someone tells you about their own stock market prowess because “perfection can never be attained; if you claim you are winning all of the time you are lying to yourself as well as others” (382). This proves you must be careful with the story you tell yourself and the ones you admire since nobody gets it right 100% of the time.
Essentially, “all twelve of these tales demonstrate the hazards of violating your discipline and letting your emotions control you. Being blind to opportunity, being frozen in the face of danger, not being tough enough mentally and being too stubborn when you thought you were being skeptical—these are all actions born not of rational thought but of emotional weakness” (406).
THE WRAP UP
There you have it! The 3 keys for a beginning investor, or any other investor at any stage, is to get rich carefully by staying discipline, controlling your emotions, and keeping your portfolio diversified.
The entire book has so many more great tips that can give you a definite strategy to reaching your financial goals, I couldn’t write about all of them and spoil the read. Even the outdated chapter “CEOs: The Bankable 21” offers timeless advice because some are still at the company Cramer wrote about in 2013, and others have moved on to uplift other companies, and those companies would be great prospects to follow, research, and invest in. Take Disney, for example, they just brought the bankable CEO, Bob Iger, back so it may be time to invest in a position in Disney before the masses figure it out.
The book was so good, I could geek out all day! To sum it up, Cramer said it best, “If you are going to Get Rich Carefully, you are going to have to get rich over time—no shortcuts” (4).
Thank you for reading our book review about Jim Cramer’s Get Rich Carefully by James J. Cramer. We are not affiliated with the publisher, but here’s the link to pick up a copy.
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E. R. Sanchez is the author of Fried Potato Press’s first young adult thriller, Petaco Dreams, which will be released in 2023. He also has poems and stories published online and in print. If you’d like to read his work that was published online, please click here to go to his Stories and Poetry Section.