What is the key difference between bulls, bears and hogs?
"Bulls make money, bears make money and hogs are slaughtered," says Jim Cramer – Rule 5 of his "5 Winning Stock Positions Rules Positions", which Cramer presented exclusively in his latest monthly video conference call with members of its Action Alerts PLUS club for investors.
Cramer thinks you can make money either as a bull or a bear on Wall Street, but you have to keep your greed at bay and be sure to lock in some profits when your positions are going well. "We [are] true believers in the idea that no one has ever been hurt to gain profits," Cramer told the club members.
He said he held onto his position when it went up could be a bad investment strategy, selling everything instead of holding some stocks in a winning stock that you like. Instead, he recommends trimming back some of your winning positions to lock some winnings while holding some stocks if you think more wins are likely to be.
But trimming the positions is an art more than a science, Cramer said. In fact, he admitted that his charitable trust recently made mistakes with posts held in PayPal (PYPL ̵
In the case of PayPal, Cramer said his confidence made the mistake of selling his entire position when the stock went up much time, but could have done even more if they had hung up on some stocks. "We had made so much money so fast that we ignored our trimming discipline for stocks that we liked [and] ended up leaving nobody at what was then a nearly 20-point run," said the expert.
On the other hand, Cramer's trust has trimmed, but not completely shut down a gambling stake in Amgen despite many reasons to sell, such as the rise of "biosimilar" drugs – competing drugs similar to Amgen's patented drugs.
"Even as we were concerned about biosimilarities, although we were worried about anti-migraine drug competition, all we did was trim [Amgen]" Cramer said. "Knowing when to trim and know when to sell shouldn't be confused. We should have dumped Amgen because it was real chinks in the armor. There was no reason to sell the whole of PayPal when we made the first sale."  Check out all Cramer's 5 rules for trimming your winning stock positions
Click here for a free 14-day trial of Jim's Action Alerts PLUS Investor Club and get instant access to a complete replay of the entire its video conference ring, including all five rules for trimming your winning stock positions.
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(This item has been updated.)