makeitrain9:very good advice im in a similar position thanks for taking time to be so helpful
No problem. By the way, Trader believes he can "see" the market moves. I haven't known a person who could; even Warren Buffet struggled to see the market ahead. He loves to say "since we are in a bear market" even though we just rallied 20%. 1999-2009 was a secular bear market, but no one knows what 2009 to 2019 will be like. Warren's long-term investment philosophy along with his entrepreneurial nature made him among the wealthiest in the world; he competes with Bill Gates constantly for that top spot.
Trader's call that the market will drop 50% is as ridiculous as my 2013 hypothetical. More likely than not, the market will continue to move higher but the positioning will likely be in between mine and Trader's; it is my expectation that if this is true that we will be at 14,000 in 2013.
When you invest in the market, such as thru the S&P 500, it isn't to "time" the market. Too many people try to time the market and they hurt their long-term prosperity in doing so.
Bogle believes buying index funds is the best way to prosperity thru long-term investing over time. He believes in the Efficient Market Hypothesis and believes, in my opinion, that market timing is a frivolous strategy.
Buffet on the other hand believes you should buy between 1-15 stocks and know those stocks extremely well. He believes you should only change them if you have a good reason to do so; he has stocks he has in his "forever" portfolio. I think the biggest mistake that Buffet made was when, he at a young age, sold a stock before it had a big run. He seemed to take that lesson to heart. Also, buying GS at $117 was a larger hit than usual because it fell another 60% till it hit the trough when he typically has his stocks go down about 30%. Buffet was more of a venture capitalist than a stock picker because of how he funded companies thru his stock purchases and helped believe in speculative ventures like Geico. Buffet's main inspiration was Ben Graham (a prolific value investor).
Cramer believes you should have between 5-10 stocks and that you should do an hour a week per stock. He has the fable, buy and homework, not buy and hold (so he takes a page from Buffet there). Unlike Buffet and Bogle, he is more of a trader, but he definitely leans towards the investment side rather than the trading side. He believes that when you get to 15+ stocks, it is like running your own mutual fund. He believes that you should have no more than 20% in one sector and even airs a segment called "Am I Diversified?" Cramer also implements a compromise between Bogle's and Buffet's strategy and is one I find very attractive. Cramer recommends in his Stay Mad for Life to have three portfolios. The first portfolio is a 401k and that is made up of employee matches (but not if the only way to get the match is to own the employer's stock). He actually endorses, I think, giving up the employee match if it means owning the employer's stock. The second portfolio is your retirement portfolio (i.e. the RothIRA) where you mostly own mutual funds. The third portfolio is the taxable or individual account; this account is your MadMoney portfolio where you trade a portfolio of 5-10 stocks. There is one exception: sometimes he endorses using REITs, preferred stocks, or energy trusts in a retirement account since the dividends are subject to ordinary income taxation but also believes that if you have a gain, you should sell even if it means giving up a capital gain, two days later, shall the fundamentals of a company change. He believes it is best to pay the tax man and keep the gain rather than risk losing it; that's why he's so much into buy and homework. Lastly, when Cramer worked at his hedge fund, it looked like he detested margin; he hated it. But it does look like he may have taken long & short positions while there. I have no clue as to whether he bought option contracts there, but he did buy options on the Gulf Oil takeover when he was in college. I believe that was 25 years ago. I think it was only a one time occurrence, 25 years ago, but I am not certain, either way.
Good luck with your investing career. There's a lot to learn.
Aqua