Too often investors end up selling a stock at the wrong time because they never anticipated selling it in the first place, Cramer explained. Similar to the "Bristol-Myers theorem," if investors don't know what they own and why they own it, it's easy to panic at the first sign of trouble.
In particular, Cramer said high-flying tech stocks cannot be owned forever because technology changes too rapidly. What's red-hot this year likely won't be next year. Likewise with cyclical stocks, said Cramer. Just because the economy is great today doesn't mean the same will be true tomorrow.
"Tech stocks are not the same as staple stocks," Cramer explained. There are tech cycles and there are economic cycles, he said, but there aren't cycles for Cheerios or Hershey bars. Learn from the dot.com bust of 2001 -- investors need to be ready to sell when the time comes, Cramer reminded viewers.
When it comes to high-flying stocks, "take profits on the way up, get out on the way down and be ready to jump ship when the time comes," Cramer concluded.To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. -- Written by Scott Rutt in Washington, D.C. To email Scott about this article, click here: Scott Rutt Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts