Cramer’s Stock Ranking Strategy.
Posted on | November 13, 2008 |
I used to think Jim Cramer was just a bobble head, but he makes a lot of sense...
When it comes to investing, I’ve always been more of a buy and hold, index kind of guy. I just don’t have the time or extras cash more managing a portfolio of individual stocks. But I’m starting to get into the idea and practice via fantasy stock simulators. I’m educating myself and honing my skills for the time when my wife goes back into the workforce, and we have some discretionary cash.
To that end, I’ve been reading Jim Cramer’s Real Money, and I have to say, I’m pleasantly surprised. I always thought of Cramer as more of a speculator or trader than I wanted to be, but I’ve come to see that there is a time and place for trading and for many of the strategies Cramer espouses. One of these strategies is Ranking. He recommends that you constantly rank (once per week or so) all of your holdings on a scale of 1 to 4, as such:
1. Buy more now.
2. Buy more if the price dips.
3. Sell if price goes up x %
4. Sell NOW.
The idea is that by ranking each holding, you are forcing yourself to be aware of your holdings and the general condition of each. It’s a lot harder to forget about your holding and suffer a serious set back due to neglect when you’re ranking them each week. You can also use the ranking to put stops into place , based on that ranking. If a stock has a ranking of 2, you can put in a limit order for more at your target price level. If the stock is a 3, you can do likewise and take some profit of the table.
Cramer Bobblehead photo by rhiannonstone
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January 9th, 2009 @ 5:26 pm
[...] 2 losers can ruin your portfolio. Because of this, you need to be ruthless in cutting your losers. Rank your stocks and act accordingly (i.e. have a plan and stick to [...]
April 21st, 2009 @ 9:01 am
[...] possibly know all that is knowable - you’re not omnipotent. A better approach is to develop a rating scale for the stocks in your portfolio, and update them once a week. When you update them, determine what [...]