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NEW YORK ( TheStreet) -- "When you own stocks, you need to be humble," Jim Cramer told "Mad Money" TV show viewers Monday, as he dedicated the entire show to helping investors protect their profits from things they likely never saw coming.

Cramer said that at some point something is going to go wrong with every portfolio, which is why diversification remains the single most important concept in investing. The traditional view of diversification means that no more than 20% of your portfolio can be in any given sector. So if you own five stocks, that means only one tech stock, one health-care name, on financial, etc.

Investors need to err on the side of caution, said Cramer. Oil producers and oil refiners may be different, but their success and failure both ride on the price of oil, which make them the same. Hardware and software are both technology, which make them the same as well.

But beyond the traditional views on diversification, Cramer said investors need to take it a step further and make sure their portfolios can win in any market, and that means owning some gold along with a high-yielding dividend stock, a growth stock, a speculative stock and a foreign stock. Cover all these bases and a portfolio will be bullet-proof, Cramer said.

Why gold? Cramer said that gold is a special case because it tends to go up when everything else goes down. Think of it as stock insurance, he said, a safe haven. He continued to recommend the SPDR Gold Shares ( GLD), as owning the gold miners themselves has proven to be too risky.

The Value of Speculation

Cramer said his next lesson for investors is to never underestimate the value of speculation in your portfolio. He said while the "professionals" will tell you speculation is a dirty word and something to be avoided at all costs, in fact speculation done right is necessary to stave off boredom and it can also net you a ton of money.

So why should you invest in stocks with single-digit price tags rather than the so-called "blue chip" companies? Well, some of those blue-chips including General Motors ( GM), American International Group ( AIG) and Citigroup ( C) have proven there really is no such thing as "too big to fail."

Cramer said there are two types of companies that fall into the single-digit territory, and knowing the difference makes all the difference.

The first type are broken companies, those little stocks that no one has ever heard of. Those are the stocks that will likely never amount to anything, noted Cramer, adding that no stock has ever fallen into the single digits because things are going well.

But the second type of low-priced stocks are those of good companies going through hard times, companies like Ford Motor ( F) or Sprint Nextel ( S) or Skyworks Solutions ( SWKS). Cramer said when these companies fall on hard times and their shares fall below $10, money managers are no longer allowed to own them, which only sends prices plummeting further.

But when the fundamentals turn, these stocks can rocket back to the upside, making the speculator look like the smartest guy in the room! These are the speculative stocks for which every investor should be on the lookout, Cramer said.

Think Growth

Cramer said the next type of stock that must be part of every portfolio is a growth company. Strong secular growers can overcome even the weakest of economies because they want what Wall Street craves -- growth and tons of it.

Stocks like ( AMZN), Chipotle Mexican Grill ( CMG), Deckers Outdoor ( DECK) and Express Scripts ( ESRX) are all examples of stocks that seem to defy gravity.

Cramer said as a general rule he's willing to pay a multiple up to twice a company's growth rate. So for a company growing earnings by 20% a year, he's willing to pay up to a 40 multiple for the stock. He said growth stocks won't typically trade below one time their growth rate unless something is seriously wrong, which make the growth/multiple metric an easy one to gauge.

Once investors have a growth name in their portfolio, Cramer said to pay close attention to the direction of the earnings estimates and whether earnings are increasing or decreasing. While growth stocks will soar as earnings are on the rise, they will come crashing down at the first change in momentum or stumble. Just look at Apple ( AAPL) or Google ( GOOG) as recent examples of growth stocks gone awry.

More Is Better

The next must-have for every portfolio is at least one high-yielding dividend stock, said Cramer. Unlike all of the other rules about diversification, this is one rule where more is actually better.

Dividend-paying stocks may not be as sexy as growth stocks or speculative stocks but, given how a full 40% of the total return of the S&P 500 has come from dividends over the past few decades, the power of dividends and compounding dividends simply cannot be ignored. Dividends are another stock safe haven, said Cramer, as yields rise when share prices fall.

That's why Cramer has coined the term "accidental high-yielder" to describe companies that yield over 4% after their stocks have taken big hits. A 4% yield seems to be the magic number that brings in new investors, noted Cramer, creating a floor for most dividend stocks.

How can investors determine if their dividends are safe? Cramer said he looks for earnings to be at least twice the dividend payout. For capital-intensive companies, cash flow can be substituted for earnings.

As for all the lingo surrounding dividend stocks, Cramer said there's only one date that matters for individual investors and that's the day before the ex-dividend date, a day he calls the "must own" date -- investors must own the stock on that day in order to receive the dividend.

Foreign Exposure

Cramer said the last piece of the diversification puzzle is for investors to own a stock with foreign exposure. If the uncertainty in Congress has taught us anything, it's that sometimes being outside of the U.S. is a good thing. Investors don't need to think of exotic locations like China or Brazil, noted Cramer. Even good old-fashioned Canada or Mexico can make for terrific investments.

Cramer also endorses owning some ETFs for foreign exposure. He said the iShares FTSE China 25 ( FXI) in China, the iShares MSCI Japan ( EWJ) in Japan or the Vangaurd MSCI Europe ( VGK) in Europe all make great proxies for trying to pick individual foreign stocks.

Cramer said it doesn't matter what country you invest in, as long as it isn't the U.S.

What's Right on REITs?

In his closing comments, Cramer responded to a viewer's question about owning real estate investment trusts, or REITs.

He said that over the past 40 years REITs have outperformed nearly every other single stock out there. This is why he continues to recommend names such as Federal Realty Trust ( FRT).

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-- Written by Scott Rutt in Washington, D.C.

To email Scott about this article, click here: Scott Rutt

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At the time of publication, Cramer's Action Alerts PLUS had a position in AIG, AAPL, EWJ and VGK.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for, Inc., and CNBC, and a director and co-founder of All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of or its affiliates, or CNBC, NBC Universal or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or is related to the specific opinions expressed by him on "Mad Money."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.