Cramer's 'Mad Money' Recap: Know Your Guru

'Mad Money' Investor Guidelines

"If you want 'Mad Money' to work for you, if you want me to work for you, then you need to be willing to commit to doing homework for an hour a week for every stock you own," he said.

Cramer recommends individual investors own at least five and no more than 10 stocks. Having fewer than five stocks puts a portfolio at the risk of not being diversified enough and having more than 10 stocks gets tricky to manage diligently.

As long as investors do have the time and inclination, Cramer believes his methods will beat mutual funds, index funds and ETFs.

While he feels index funds "involve too many bad stocks," he said it's OK to put money into a mutual fund if people don't have a lot of time on their hands. However, people should still do some homework to make sure the mutual fund is a good one, and not just one with a "brief year or two of mega outperformance," Cramer said.

"Second, if you're going to buy a mutual fund, you should only be in one and it should be a diversified fund," he said.

However, if market players do have the time, it is better for them to invest themselves in the stock market as mutual funds make their money off of the fees people pay them to manage their money and they only need to do well enough to attract more fees, Cramer said.

"Since their job is to attract new investors and make the fund bigger so it can collect more fees, a good mutual fund will ultimately get really big," he said. "And you know what a really big, cumbersome mutual fund looks like? It looks like an index fund."

Therefore, "if you've got the time, forget about mutual funds," Cramer advised.

And when it comes to ETFs -- these, contrary to belief, don't make things easier on the individual investor, he said.

"An ETF is usually highly specialized and sector-weighted," Cramer said. "Doing the homework to know what sectors are good is about as hard as doing the homework to know what stocks are good."

Plus, when people buy an ETF, it is just like buying an index or even a mutual fund, he said. "You're buying a lot of stocks that you should know are bad."

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