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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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
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.

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