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This program last aired Dec. 30, 2014.
Diversification is still the only way to invest, said Cramer, admitting he occasionally gets it wrong. Sometimes his stock picks just simply don't work out. That's investing. Any investor putting together an investing portfolio needs to be prepared, said Cramer, because sooner or later something won't work out.
Must Read: 10 Stocks Carl Icahn Is BuyingBut how should investors prepare for the next market catastrophe or stock pick gone bad? Not by being bearish but by being smart, Cramer said. Being a bear means shorting stocks, hoping they go down. That's a valid investing strategy but it limits one's profit potential since the lowest a stock can go is zero.
However, Cramer said, compare that to bullish investing, betting that stocks go higher. Their potential profits are limitless, he said. Investors who invested in Action Alerts PLUS holding Apple (AAPL) in 2009, for example, realized a 580% gain over the next three years. Beyond having a positive outlook, Cramer said the most important rule to managing your money is diversification. That means not having all your eggs in one sector basket. A portfolio with five stocks must have only one technology company, one health care name, one energy company, one industrial, etc. Two or three of a kind is a quick way to get caught off guard, so no more than 20% of a portfolio can be in a single sector. Being diversified is more than just investing in different sectors, however. Cramer said the new rules of diversification also require owning some gold in your portfolio along with a high-yielding dividend stock, a growth stock, a speculative stock and one that's firmly rooted in a healthy geography.