Every investor has their own set of rules and guidelines they follow religiously. In terms of high-profile figures, Cathie Wood's strategy focuses on something she likes to call "disruptive innovation." Wood picks out those tech-focused companies that, through research and modeling, she thinks will become potent innovators.
Warren Buffett's biggest rule is to never lose money. Of course, the stock market goes up and down, but he's referring specifically to a mindset: Investing is not gambling. Investors should thoroughly research a company before they invest in it.
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That notion of understanding is one that Jim Cramer, the host of CNBC's "Mad Money" agrees with wholeheartedly.
"You absolutely have to be able to explain your stock picks to another human being," Cramer said. "If you can't explain it, you don't understand the story well enough to justify buying the stock in question."
And on this question of understanding, Cramer thinks the internet is hurting potential investors by making the process of investing both too easy and too siloed.
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"The rise of the internet took away one of the most important warning systems, which is talking to another human being about what you want to buy," Cramer said, calling the internet a "double-edged sword."
He added that, though the internet is "great for investing" when it comes to convenience, it again reduces the necessary bar for understanding when purchasing a stock.
"You have all sorts of information available at your fingertips, something that was unimaginable when I got started in this business," Cramer said, adding that investors used to have to talk to a broker before making any purchases. "It doesn't have to be a professional. It could be anybody."
