Mad Money 06/25/26 | Audio Only

My mission is simple: to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad Money starts now.

Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramerica. I'll be with my friends. I'm just trying to make a little money for you. It's my job, not just to entertain, but to put everything in context. So, call me 1-800-743-CBC. Tweet me, @JimCramer.

Investing isn't easy, but it can be a whole lot easier and much less daunting with a little instruction. The whole business of managing your money is made infinitely more confusing by all the arcane technology and authentic Wall Street gibberish you need to wade through to learn anything about a stock or its underlying business.

If you're not clued into the jargon, it can sound like the professionals are speaking an entirely different language. You've got to remember that there's an entire industry of people who need you to be happily convinced that investing is too hard for you, that ordinary people just can't do it, and that the safest thing to do is to give your money to a pro.

Hey, by the way, that's a huge reason why I started my charitable trust. When you join the CNBC Investing Club, our goal is to show you that you can do it yourself and to teach you how it's done. Of course, maybe giving your money to a professional is the right move for some of you. Of course, maybe you don't have the time.

But if you put in a little effort, if you do the homework, then I think you can do at least as well as the pros or a low-cost index fund, possibly the better comparison. Because in any given year, a lot of the pros really lose to the index funds. The fact of the matter is that the financial industry is full of people who are just after your fees.

They're more interested in taking your money than in making you money. And if you're a hedge fund or a mutual fund manager trying to fundraise, you've got every incentive to keep regular people sadly ignorant. Why would they make any of this investing stuff sound accessible when they could make it sound impenetrable?

If it sounds too straightforward, it's harder for them to raise money and harder to convince people, convince you to pay high management fees. They're kind of like the Wizard of Oz. They don't want you peeking at the man behind the curtain. They don't want you to understand, because if you did, then you'd take control of your own finances.

You'd pick your own stocks and not pay someone else potentially exorbitant fees to do the things you are perfectly capable of doing yourself. And after all these years doing the show, I know you can do it. And that's where I come in. See, I'm pulling back the curtain and explaining everything.

Because while authentic Wall Street gibberish can sound complex, even impenetrable, it's not rocket science or brain surgery. You don't need to go to business school or work at an investment bank to understand it. You can comprehend all the mystical-sounding vocabulary that we throw around here as long as you have a translator, a coach like me who can explain what the darn words mean.

I want you to think of me as a defector, someone who played for the other team, managing $500 million of already rich people's money at my old hedge fund, but who's now playing for you, teaching you how to navigate your way through the minefield of the stock market every weeknight here on Mad Money, and of course constantly for the CNBC Investing Club.

Forget about the Da Vinci Code. Forget Enigma. Forget the Navajo code talkers. To be a great investor, first you have to break the Wall Street code. And I'm here to help you crack it. That's why tonight I'm giving you my Wall Street gibberish to plain English dictionary.

Consider it a glossary of the most important terms you'll absolutely must understand if you're going to actively manage your own portfolio of individual stocks the way I want you to. Words and concepts that many people in the financial industry don't want you to get your heads around, because then you might actually feel empowered enough to pull your money out of their expensive mutual funds.

And hey, even if you're not a pro, you may not know enough. So why not take advantage of my 40-plus years of investing experience to give yourself an extra edge? Let's start with a couple of extremely important terms that go hand in hand: cyclical and secular.

Now, you hear these all the time, yet no one but me ever bothers to explain what they mean, even though they're crucial when it comes to picking stocks. Cyclical has nothing to do with the spin cycle on your washing machine or Wagner's Ring Cycle, some of my classical music. And secular isn't about the separation of church and state or public versus parochial schools.

Oh yes, and kudos to the late great Lou Rukeyser, who first cracked that cyclical washing machine joke. And I've always remembered it, it's probably been about 50 years now. We say a company's cyclical if it needs a strong economy in order to grow. It's cyclical because it depends on the business cycle. Cyclical, cycle.

So metals and mining companies and oil and gas, really any kind of raw materials, plus most of the industrials are cyclical. The homebuilders are cyclical. The oil makers are cyclical. The commodity chemical makers like Dow are cyclical. You want a bunch of copper and iron mines like BHP? That's the definition of cyclical.

These companies are all hostage to the vicissitudes of the economy. When the economy heats up, they earn a lot more money, and we're willing to pay more for those earnings. And when the economy slows down or shifts into a recession mode, they earn a lot less money and investors pay less for their shares. I always say the cyclicals are boom-and-bust names.

A secular growth company, on the other hand, is one where the earnings keep coming regardless of the economy's overall health. Think anything you eat, drink, brush your teeth with, or use as medication. So you've got consumer staples like Procter & Gamble or Kraft Heinz, food companies like General Mills, the drug stocks like Pfizer or Merck or Eli Lilly.

These are the classic recession-proof names that you want to buy when the economy slows down. Investors flock to the companies that can generate safe, consistent earnings, unless the GLP-1 drugs actually really take over the world, because you don't stop eating food or brushing your teeth just because of a recession. Okay.

So why is this secular versus cyclical distinction so important? Why is it the first piece of Wall Street jargon I'm translating for you? Because it helps you figure out how much companies can earn in a given environment. And because it matters to the big institutional money managers, the guys who have so much cash to throw around that their buying and selling pretty much defines the whole market, at least in the short term.

See, the whole hedge fund playbook is about when to buy and sell cyclical stocks or secular ones based on how economies around the world are doing. This is what drives the decision-making process. Now, in the old days, 50% of the performance of any individual stock came from its sector, which is just a fancy word for the segment of the economy a stock falls into, like tech, energy, machinery, healthcare, finance.

And when it comes to sectors, much of their moves are driven by whether they fall into the secular or cyclical camps. These days, it's much more than 50%, and that's really thanks to the rise of sector ETFs. You don't want to own much in the way of cyclical when the economy is slowing. These stocks are simply going to get crushed because their earnings tend to fall apart, as they have during every meaningful slowdown sell-off, including Chinese slowdowns, and there's nothing about that you can do.

What do you do? But by the same token, when business heats up and the cyclicals are all doing well, nobody wants to own the boring, consistent secular growth names, the food and the drugs, and you won't make as much money in them during those periods either. You have to accept that you're not a trader. You just accept it.

Now, you always want some cyclical stocks and some secular stocks in your portfolio because you can never be completely sure where the economy is headed. But when business looks like it's booming, you want a lot more cyclical exposure. And when business looks like it's falling off a cliff, you want a lot more secular exposure.

The bottom line: investing ain't easy, but it doesn't have to be mystifying. You just need to learn the language, know the difference between cyclical and secular growers, and always stay diversified. Shane in Alabama. Shane.

Absolutely.

Okay, I'm blowing out of all that. I think that we want to bet against our... don't want to bet against ourselves. We want to bet with ourselves. I am betting that people are going to have a long life, hopefully a happy life. So, we're buying and keeping a lot of stock right almost to the end.

When you're 60, 70, I still think that's young, and I think you should have 70% stock. I know that's higher than what I've usually said, but I just think that you're not going to get the return from bonds that people want, and I'd rather have you in stock and then take it down to 30 or 20, depending upon how you feel about yourself. I want you to be thinking about living long, and I think you live longer. It's my own psychology. Joseph in Florida. Joseph.

Not bad, Joseph. How about you? Thank you for calling.

All right. So, look, a 529 plan is perfect, and put them in a low-fee S&P 500 index fund. I did that for my kids, and they are eternally grateful, and you're going to do it for yours, too. How about Edna in New York? Edna.

Well, I want you to be informed active investors. Absolutely. How can I help?

Here's what I want you to do. I want you to take, starting now, every month, take a twelfth of that money and put it to work. We're not going to put it all to work at one level. One twelfth. And then if we have a really bad month, I want you to double down and put a sixteenth in.

And when we're finished in the third and fourth quarters, well, we'll figure out whether you need to have a little more cash. But that's how I want you to invest that money. That's long-term money, and that should be in stock, not bond. But over time, not all at once.

Investing isn't easy, but it doesn't have to be mystifying. You just need to learn the language. On Mad Money tonight, forget Merriam-Webster. I'm helping you demystify all that Wall Street speak. That's what you need. From P/E multiples to GARP and much more. I'm cracking open my dictionary to help you navigate the market and take charge of your portfolio. That's what I want. So stay with Cramer.

Tonight, I'm helping you translate the cryptic and occasionally unfathomable terminology that makes owning stocks so darn difficult. Yep, I'm giving you the phrase book to navigate your way through the world of investing. Hey, but why do we call it the Michelin Guide to Fine Stock Tining? Consider it the televised encyclopedia of Cramerica for tearing back the cloak of mystery that can make managing your own money seem like an impossible task.

The process of picking stocks shouldn't seem as difficult as, say, conducting triple bypass heart surgery on yourself. You don't have to be Stephen Hawking or Albert Einstein to understand this stuff. Although, with the way a lot of the pros talk about stocks, I bet even Einstein would have a tough time figuring out what the heck they're saying.

Now, I just explained the difference between cyclical companies, think industrial smokestack businesses that need a healthy economy in order to grow earnings, versus secular growth, think toothpaste, okay, that consistently expand at about the same pace regardless of where we are in the business cycle.

How you have to sell the cyclicals and buy secular growth when the economy starts to slow, then do the reverse as it starts to pick up steam. This is the playbook that all the hedge funds use. And even though these hedge funds can often behave like herd animals, wildebeest who often buy and sell the same stocks at the same time, they operate this way because their playbook works.

The reason for that has to do with another piece of Wall Street gibberish lexicon that you absolutely must know if you're going to pick stocks by yourself. It's called the price-to-earnings multiple, or P/E multiple, or just the multiple. They all refer to the same thing, and it's the cornerstone of how we value stocks.

In fact, when you hear talking heads pontificate about how some stock has become overvalued or undervalued, they're almost always really talking about the price or multiple. When you hear someone say that Pepsi is more expensive than Coke, okay, they don't mean that Coke's cheap because it's trading in the 50s while Pepsi is trading in the triple digits.

No, the share price tells you nothing about a stock's valuation vis-à-vis another stock. To make any kind of apples-to-apples comparison, you take a step back. See, when you buy a stock, you're actually buying, paying for a piece, small piece of a company's future earning stream. That's what the stock is.

So to value a stock, you have to look at where it's trading relative to the earnings per share, which you often see rendered as EPS. And that's what the multiple allows you to do. Now, here's the basic algebra, not even math, that any fourth grader, I think, should be able to do.

The share price P equals the earnings per share E times the multiple M. Okay? The multiple tells you how much investors are willing to pay for a company's earnings. We don't care that Coke stock might be at $55. We care that it sells for 19 times earnings. We don't care that PepsiCo, say, might be at the time 165. We care that it sells for more than 20 times earnings.

Or to put it another way, the multiple is the special sauce of valuation. The main ingredient in that sauce: growth. How much bigger the earnings will be next year than they were this year, and the year after that, and the year after that, on and on. The stocks of companies with faster growth tend to get rewarded with higher price-earnings multiples.

Why? Okay, remember, the multiple is all about what we're willing to pay for future earnings. And the more rapidly a business grows, the bigger its earnings will be down the road. So if a fast-growing software stock sells for, let's say, 25 times earnings, that doesn't make it more expensive than a slow but steady grower like Pepsi at 20 times earnings. The faster grower actually deserves the bigger multiple.

Now, here's where it gets real interesting. Price-to-earnings multiples aren't static. In different markets, people pay more or less for the same amount of earnings. When they pay more, we call that multiple expansion. And when they pay less, it's called multiple contraction. Two more terms that sound much more complicated than they really are.

For example, whenever interest rates skyrocket, making the bond market competition a lot more attractive, we see marketwide multiples contract because everybody's future earnings are suddenly worth less by comparison. Of course, the earnings aren't static either. When you buy a stock, you're either making a bet that the E or the M part of the valuation equation is heading higher.

So, what goes into the earnings? How do you make sure that they're increasing and not about to collapse? Okay, here's some more vocabulary. When you hear people talking about a company's bottom line, or perhaps their net income, they all mean the same thing: earnings. We call it the bottom line because the number is the bottom figure on a company's income statement.

To figure out how quickly a company's earnings could grow in the future, you have to look for clues when it reports its quarterly results. That's why I'm always telling you to listen to the conference calls. By the way, we do that homework for you in the investing club with all the charitable trust holdings. That's why I think it's such a good idea to be a member of the club.

Step one to getting your head around the future earnings trajectory: you need to look at the top line. Oh boy, another unnecessary piece of Wall Street gibberish that's totally interchangeable with revenues or sales. They all mean the same thing. You want to see strong revenue growth, which tells you that there's demand for a company's product.

This is ultimately the key to the ability of most businesses to sustainably grow their earnings long term. And that's why it's especially important for younger, smaller companies to have fast-growing revenues. Oh, and investors will really pay up for accelerating revenue growth. Accelerating revenue growth. ARG, which means the sales are growing at a higher and higher rate.

With a more mature company, it should be able to turn its revenues into profits by cutting costs, and then it can return those profits to shareholders in the form of a dividend or potentially a buyback. Beyond the top line and the bottom line, it's also crucial to consider the gross margin, which is in no way disgusting and not the least bit marginal.

The gross margin tells you what's left after you subtract the cost of goods sold from the sales. It's a key profitability metric. To figure out the gross margins, you have to consider the competition, the cost of production, and the cost of doing business in general. Businesses with cutthroat competition, like supermarkets, tend to have terrible margins.

While a virtual monopoly like Microsoft has margins that are out of this world. In some industries, the margins can vary widely. Take the oil business, where the margins swing up and down with the price of crude. In that case, you need to watch supply across the whole industry. Oil production for energy, inventories for retail.

Too much oil pushes prices down, right? Too much retail inventory forces stores to discount their goods aggressively in order to make space for the new merchandise. Both are what we call margin killers. So, here's the bottom line: you need to know the vocabulary before you can evaluate a stock.

When you're comparing, look at the price-to-earnings multiple or P/E, the growth rate, the top line, the bottom line, and the gross margins. I know this might sound basic to many of you, but I'm here to educate people, and I don't want anybody trying to pick stocks without a firm understanding of the basics. It's another great reason, by the way, to join the CNBC Investing Club. Mad Money is back after the break.

Tonight, I'm going into Penn and Teller mode, demystifying all the overly complicated, technical-sounding Wall Street gibberish that you hear constantly but might not understand. I want to translate the most overused, underexplained terms in the business, putting them into a language that's fit for human consumption. Consider this show your Wall Street to English dictionary.

A televised glossary that'll help you navigate your way through tough markets and the tough-sounding terminology that keeps so many people out of stocks. Not doing myself justice. I'm not, and I've got to help you to understand this stuff so you can be better. Of course, joining the club is going to help.

Now again, all this investing terminology sounds difficult because the pros who speak Wall Street gibberish fluently, well, they want it to sound difficult. They're the opposite of me. They want you terrified. They want you feeling totally ignorant and at a complete loss when it comes to managing your own money. My mission is just the opposite of theirs.

I am here to try to enlighten you, to teach, because I know that you can do better for yourself than the professionals. I've been down here for 40 years on Wall Street. I know this stuff. And most of the professionals, they kind of just want your fees. I'm not managing anyone else's money. I don't own stocks except for my charitable trust. So I give away my winnings to charity.

And I walk you through the whole process of running the trust for the CNBC Investing Club. It's the anti-establishment. It's not, look, it's not just enough to come out here and tell you which stocks I like, because you can't own them if you can't understand them. Knowing what you own is a must. It's one of my cardinal rules.

It says if you don't have a good grasp of what you own and what your holdings are, you won't have any idea what to do when the stocks turn against you. And believe me, inevitably at some point they will. You can't know when to hold them and know when to fold them. In the immortal words of stock ace Katy Rogers, unless you know what the heck it is that you're actually holding and what might make you fold.

Unfortunately, the profusion of arcane terminology on Wall Street makes it much harder to know what you own. So, let's continue our vocabulary lesson with another ultra-important piece of verbiage that's hardly ever explained to you, even though it's used constantly: risk-reward.

The risk-reward analysis pretty much defines short-term stock picking. So, what does it mean? All right, let's break it down into its component parts. Assessing risk is all about figuring out the downside: how much you potentially stand to lose in a given stock, how far it can conceivably fall in the near term.

Assessing the reward, on the other hand, means figuring out the potential upside: how much the stock could rally if everything goes right. Too many investors only focus on the potential upside when they're analyzing stocks. And that is a great, great mistake. It's much more important for you to understand the risk side of the equation, because the pain from a big loss hurts a lot more than the pleasure from an equivalent-size gain. Trust me.

But how exactly do we figure out the risk-reward? Okay, these are determined by two different cohorts of investors. The reward, the upside, is defined by how much growth-oriented money managers could be willing to pay for a stock. They create the top. The risk, the downside, is created by what value-oriented money managers would pay on the way down. They create the bottom.

To figure out the risk, you need to consider where the value guys will start buying on the way down. To solve for the reward, you need to think about where even the most bullish of growth guys would start selling on the way up. When asked, I usually boil the risk-reward down to something quick and dirty like five up, three down. But how do I get there?

How do you know whether growth money managers will start selling and value guys will start buying? Okay, for that you need some insight into how they think, and that requires translating another piece of esoteric Wall Street lingo. It's called growth at a reasonable price. I really believe this, by the way. Growth at a reasonable price, aka GARP.

When we talk about growth at a reasonable price, that's not subjective. It's a method of analyzing stocks first popularized by the legendary Peter Lynch by comparing a stock's growth rate to its price-to-earnings multiple. If you want to figure out the maximum the growth guys would be willing to pay for a stock, you need to be able to look at the world according to GARP.

You want to learn more from Peter Lynch? It's easy. Go to Amazon and buy One Up on Wall Street or Beat the Street. These are two of the most important investing books ever written. Now, here's a quick and dirty rule of thumb.

That's hardly ever let me down, although there are some exceptions. A rule that can really help us figure out when a stock might be overvalued or undervalued based on what the growth and value managers would be willing to pay. If a stock has a price earnings multiple that's lower than its growth rate, then that stock's probably cheap. And any stock selling at a multiple that's more than twice the size of its growth rate, probably too expensive. So, if a stock's trading at 20 times earnings and it has a growth rate of 10%, then it probably doesn't have much more upside. It's reached the two times growth ceiling. Always remember that. Here's another piece of Wall Street gibberish that can help simplify the process. The PEG ratio, PEG. That's the price to earnings to growth rate, or the PE multiple divided by a stock's long-term growth rate. A PEG of one or less is extremely cheap, and two or higher is prohibitively expensive. Sell, sell, sell. A high-octane, super-fast grower could suffer 40 times earnings and still be inexpensive because if it has a 40% plus long-term growth rate, giving it a PEG of just one, right at the cheap end of the spectrum, and the growth keeps accelerating, sending the stock to a new high after new high. That makes sense to me. Where did I come up with these numbers? Observation. The value investors who will be attracted to stocks selling at PEGs of one or less create a floor. You'll usually be able to find a buyer if a stock's multiple is at or below its growth rate. The growth investors who buy high-multiple stocks hardly ever pay more than twice the growth rate, a PEG of two, which means there's almost no way that stocks go higher. So stick with the example of Google back when it still held that mega growth mojo with a 30% long-term growth rate. It would have become a sell if it traded to 60 times earnings, just too darn high, as I have learned over and over and over again since the show began oh so many years ago. Like with any of my methods or anyone else for that matter, this one is a rough approximation, a bit of subjectivity. It's useful especially when you're trying to figure out the risk-reward, but it's not always right, and it only applies to companies that trade on earnings, not unprofitable companies with stocks that trade on sales. Plus, stocks will often get cheap on an earnings basis simply because the estimates are too high. You see this all the time going into a slowdown. In those cases, the stock could trade well below the one times growth floor. Its PEG could just keep sinking and sinking. And the fact that it looks cheap, it's a value trap. It's not a bicycle. On the other hand, the best time to buy cyclical stocks, think the smokestack industrial types, is when their multiples look outrageously expensive because the earnings estimates are way too low and need to be raised to catch up with reality. That happens when the economy is bottoming and about to rebound. The bottom line: know what you own and know what others will pay for it. That means you need to understand the risk-reward, the potential downside and potential upside before you purchase anything, by figuring out where the growth investors put in the ceiling and where the value investors create the floor. Nicholas in Nevada. Nicholas,

Well, I'll tell you, you're young and that means you have to go with higher-risk stocks than I typically talk about on the show. Maybe some smaller-cap stocks, maybe some biotechs, maybe some companies that are on the ground floor of AI. I don't want you to be loaded up with companies that are older because you have your whole life to make it back if they go away. A lot of our older viewers and middle-aged viewers cannot afford that to happen. So, go with high-risk, potentially high-reward stocks. Mark in Iowa. Mark,

Thank you for being a member of the club. It's terrific. How can I help?

Okay.

Well, I think they're going to be under pressure, and I think it's natural that you ask that question, and it's one of the reasons why I'm not recommending any of those stocks because you correctly have thought about what is the nemesis of those particular stocks. Now, as long as you understand the risk-reward, the GARP and the PEG ratio associated with picking stocks, you're much better prepared to know what you own and know what others, more importantly, will pay for it. Now, much more Mad Money. Do you know the difference between a rotation and a correction? I'm not done cracking the Wall Street code. And you better be seated when Professor Cramer opens the dictionary. Plus, my colleague Jeff Marks and I are taking all of your burning investing questions. So stay with Cramer.

Managing your own money is a whole lot less daunting than it seems when you have a translator, someone like me, who can help you decode the intentionally obscure terminology that the experts use to talk about stocks all the time. And that's why I've been giving you my televised Wall Street gibberish to English dictionary so that you can see through the mystery and understand. I got to get you to the essentials of investing. It's the most important thing I can do. That's what I do for a living. So far, I've been explaining the complicated-sounding pieces of jargon that are actually pretty simple stuff we do every day at the CNBC Investing Club. But the difficulty goes in two directions. Just as there are many concepts that seem misleadingly complicated, there are also plenty of other terms that are much less simple than they appear. Take the notion of a trade versus the notion of investment. A lot of people would say these two words are interchangeable, that there's no difference. But that couldn't be further from the truth. They're distinct. And in the immortal words of those '90s stock gurus, Offspring, you got to keep them separate. Isn't this just splitting hairs, something that's not recommended for the follically challenged like myself? Isn't it a cajun tree? That's a SAT word of the day that might send you searching for a real dictionary. Nope. A trade is not the same as an investment. And if you treat the one like the other, if you treat a trade, if you turn a trade into an investment, breaking my first commandment of trading, then in true Mr. T fashion, all bets are off. Rocky III, my prediction for your portfolio is pain. When you buy a stock as a trade, you're buying for a specific catalyst, some anticipated future event you think will drive the stock higher. Maybe the company's about to report its quarterly results and you think it will deliver better-than-expected numbers. Although I don't recommend trying to game earnings, there's just too much chaos and confusion in individual earnings reports, which can cause the stock to get clobbered even if it delivered stellar numbers. The catalyst can be news about some event you're predicting. For example, let's say a pharma company getting FDA approval for a big new drug, or even just some clinical trial data you think will be positive. These are data points that can send a stock soaring if they go your way. So when you make a trade going into it, you know that there's a moment to buy before the catalyst and a moment to sell after the catalyst happens. Sometimes your trades won't work out. The event you're waiting for won't happen. Or maybe the data point you're expecting simply turns out to be less positive than you expected. Either way, when you buy a stock as a trade, it has a limited shelf life. There's only a brief window where you want to own it. Once the window passes, you must sell. Hopefully, it'll be the right catalyst and you'll rack up a nice gain. If that happens, no point in sticking around. Ring the register and lock in your profits before they evaporate. But if you turn out to be wrong, well, guess what? You still need to sell. I want you to think of it like this. When you buy a bottle of milk, you don't drink it after the expiration date, right? You throw it away. The logic of trading is pretty similar. You can't just buy more and call it a longer-term investment because without the catalyst, you got no reason to own the darn stock. And you never ever should own anything without a reason. I've watched an endless parade of people lose money by turning trades into investments. They come up with alibis for staying in a stock long after its expiration date. They're really fooling themselves into believing they're doing the right thing, and then more often than not, they get crushed. So remember, without a catalyst, you don't have a trade. If you find yourself in that position, then you better sell and cut your losses. No catalyst, no point. An investment, on the other hand, is based on a long-term thesis, the idea that a stock has the potential to make you serious money over an extended period of time. You're not just banking on one specific catalyst. You're expecting many good things will happen in the company's not-too-distant future. And that's not an excuse to buy a stock and then forget about it, though. Investments can go wrong, too, which is why I'm always telling you to keep examining your stocks after you buy them. That's called buy and homework, not buy and hold. Of course, we help you with that homework for our charitable trust teams in the CNBC Investing Club. So, when a stock you like as an investment goes down in the short term, it makes sense to buy more as long as the fundamentals are still sound. The corollary here is that you don't ring the register after the first time the stock jumps in price. With an investment, you're looking for longer gains, larger gains. And what you do is you measure it not in terms of trade and sell, but a much longer period of time. And again, that is what we do at the Investing Club. Bottom line: not all Wall Street gibberish is deceptively complicated. Some of it's deceptively simple, like the distinction between a trade and an investment. Don't confuse them. Remember, they're not the same. And it's a big mistake to turn a trade based on a catalyst, whether successful or unsuccessful, into an investment, which is a long-term bet on the future of the business. Mad Money's back after the break.