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- CNBC’s Jim Cramer warned that staying out of the market because of fear is costing investors big gains.
- He encouraged investors to buy quality stocks and index funds rather than trying to time the market.
watch nowVIDEO01:17If you don’t stick with your favorite stocks, you will miss some of the biggest gains of the year: Jim CramerMad Money with Jim Cramer
CNBC’s Jim Cramer said one of investors’ biggest pitfalls is letting fear drive them out of the market before its biggest gains arrive.
“There are about seven days a year when most of the money gets made,” the “Mad Money” host said, recalling advice from billionaire investor Ken Langone. “You never know when those days are going to come, though, so you need to hang on through the bad times to reach the promised land. But most people can’t handle the pain.”
Cramer said that’s why investors should resist the temptation to jump in and out of the market. Instead, he said they need to endure periods of volatility to capture the handful of trading sessions that often generate a significant portion of long-term returns. According to JPMorgan, an investor with $10,000 in the S&P 500 who missed the 10 best trading days between 2005 and 2024 would have ended with less than half the wealth of someone who simply stayed invested.
One of the biggest obstacles, he said, is the constant stream of negative headlines. Investors are bombarded with warnings about AI spending, geopolitical tensions, inflation and interest rates, making it easy to lose confidence even when companies continue to execute.
“There’s a whole cottage industry of negativity that exists to shake your confidence,” he said, later adding: “The hard part isn’t picking winners, it’s forcing yourself to stick with them when the whole world wants to frighten you away from stocks.”
Cramer argued that Tuesday’s rally showed the cost of giving in to that pessimism. Investors who let negative headlines keep them on the sidelines missed some of the market’s biggest winners, including Palantir and Wayfair, which each surged roughly 30% after reporting strong earnings.
“I say you can’t afford to listen to these sirens of pessimism,” he said. “You may have to strap yourself to the mast, you may have to take pain, maybe lots of pain, but if you can just accept that there’ll be days of pain, I’m telling you that you can and will prevail.”
For investors who don’t want to pick individual stocks, Cramer recommended consistently buying a broad-market index fund each month instead of trying to time the market. The same advice applies to owning the index through the ups and downs to ensure investors don’t miss the market’s best days.
“So don’t just stand there, get to work doing some homework and get ready to buy something,” he said. “I’m not saying you’re guaranteed to win if you hold onto a stock long enough, but if you don’t stick with your favorites, you’re absolutely going to miss the biggest gains of the year.”
VIDEO04:09Jim Cramer talks how to get ready for the next rally
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