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This program last aired Dec. 23, 2011.
NEW YORK (
) -- "Investing is a lot like comedy. Timing is everything," Jim Cramer told "Mad Money" viewers. That's why he dedicated his entire show to going over the frequent errors that investors make when buying and selling stocks.
Cramer said that knowing when to buy and when to sell is one of the most important, and most frustrating, parts of managing your own money. That is likely the reason why there is an entire cottage industry of financial advisers telling investors that it simply cannot be done, that they should just put their money into index funds and leave it there forever. Cramer said that while index funds have their place, telling investors that they're the only way to make money is totally bogus.
Timing makes all the difference, Cramer explained. He said there's a big difference between buying stocks at the market peak in October 2007 and buying them at the generational bottom in March 2009. There's a difference between buying stocks before the European financial crisis began to rule the world's markets and after.
Cramer explained that one reason timing the markets is so hard is some of the best moments to buy are during the moments of greatest terror. He said that it's almost never the right time to sell when the markets are panicking. History has proven that whether it was the crash of 1987, the flash crash of 2010 or the attacks on Sept. 11, 2001, what worked best was to be prudent and not to panic.
Perhaps the only exception was the financial crisis of 2008. Cramer said he was widely criticized for telling investors to sell their stocks in October 2008 -- but with the entire financial world as we knew it on the brink of collapse, the call to sell proved to be the right one, and investors were able to side-step the additional 35% decline in the averages.
But other than that one special case, Cramer said dumping stocks into a selloff is always the wrong move. "Keep your head, because you will get a better moment to sell," he concluded.