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Cramer uses Apple to outline the differences of trading vs. investing

With Wall Street abuzz about Apple’s new product launch, which included a new, high-end iPhone model, CNBC’s Jim Cramer wanted to clear the air for those wondering if they should trade or invest in the tech giant’s stock.

“Investing and trading require two very different mindsets. When you invest, you’re going in for the long haul,” the “Mad Money” host said, reflecting on his 21 years as both an investor and a trader. “You don’t want to buy all at once. Instead, you buy gradually, in stages on the way down.”

One of Cramer’s central investing mantras is that your first buy probably won’t be your only buy. Investors should think ahead and leave room to buy high-quality stocks when they decline.

While Cramer admitted that strategy isn’t perfect, he said it’s a good way to prevent yourself from being shaken out of stocks and to view downturns as opportunities rather than obituaries.

“Imagine you’re buying an Hermes tie,” Cramer said. “Let’s say you pay $200 for it — I know, it’s insane, OK? $200. But it’s true. Now, let’s say then you go and you see the same tie marked down the next day for $150. You don’t assume that you should throw away your current tie because it lost value. Instead, you buy more ties because Hermes makes quality merchandise and, after all, you can’t wear the same tie every day.”

That’s how you should think about investing, Cramer said. Be sparing at first so you don’t get shaken out (or unreasonably buy a bunch of $200 Hermes ties), then buy more at a lower price.

Trading is totally different. It’s event-driven, meaning traders search for a catalyst in order to sell a given stock. Whether or not…

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