Cramer's Advice: Don't Give Up

Jim Cramer's newest book, Getting Back to Even, is out in bookstores today. We're publishing this excerpt as a sneak preview for TheStreet readers.

So why should you believe that investing in stocks, which got us into the mess we're in, can also get us out of it? Why not just cut your losses and stick your money in a traditional savings account where you won't have to worry about it? First of all, because you'll never get back to even that way, and second, because there is a world of difference between owning stocks, which has caused so much wealth to disappear, and trying to make money in stocks, an approach that at the very least lets you sidestep some of the pain. You can get back to even if you follow the latter course.

Most peddlers of financial advice, even after the wealth-shattering crash of 2008, preach the virtues of owning stocks just for the sake of owning them. They will still tell you to buy and hold, an investing shibboleth that I have been trying to smash for ages. The buy-and-hold strategy, if you can even call it one, is to pick a bunch of good-looking blue-chip companies, buy their stocks, and hang on to them till kingdom come. Selling is strictly forbidden. It's considered a sign of recklessness, of "trading," which all too many supposed experts think of as a dirty word. Same goes for the once-sacred mutual funds, with managers who adopted the same careless buy-and-hold, one-decision philosophy.

If you had practiced buy and hold over the last decade, you would have gotten exactly nowhere. The major averages have literally fallen back to levels they first hit ten years ago. That means, for example, that if you'd contributed a little bit to your 401(k) each month, the way most people do, then most of your buying was at much higher prices. The results are in and this philosophy has lost more people more money than anything save gambling, and frankly, it's hard for me to see the difference between gambling and deciding to permanently own stock in a company that could change its stripes at any moment. It's investing blind, and investing blind is no different from investing dumb.

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Jim Cramer will be signing books and answering questions around the New York metro region over the coming weeks:

• Tuesday, Oct. 13, 7:30 p.m.: Barnes & Noble in Paramus, N.J. (765 Route 17 South)
• Wednesday, Oct. 14, 7:00 p.m.: Borders in Bridgewater, N.J. (290 Commons Way)
• Tuesday, Oct. 20, 7:00 p.m.: Mendham Books in Mendham, N.J. (84 East Main St.)
• Tuesday, Nov. 17, 7:00 p.m.: Barnes & Noble at Union Square in Manhattan (33 East 17th St.)