Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
NEW YORK (TheStreet) -- Some say owning individual stocks is just far too dangerous, but Jim Cramer told his Mad Money viewers Wednesday that if they buy what they know and pay attention while they own them, the rewards will be far greater than just owning a basket of stocks that include the good, the bad and the ugly.
You may have heard the latest catch phrase going around Wall Street, the notion of "single stock risk," as in, it's better to own an index fund or a sector-based exchange-traded fund rather than risk owning individual stocks, Cramer said. But while index funds do have a place in the investment world, mainly for those with less than $10,000 to invest, or those without the time or inclination to do their own stock homework, the vast majority of investors are indeed smart enough to make decisions that beat the averages.
Don't be scared out of owning a piece of American industry, he said, stocks like Colgate-Palmolive (CL) which is up 591% over the past two decades or R.R. Donnelley (RRD), which pays a hefty 5.3% dividend and is up 15.4% so far this year.
Even in troubled sectors, like the homebuilders, there are winners like Lennar (LEN), which used the recession to buy up land on the cheap, enough to fuel it for decades to come. Shares of Lennar are up 173% over the past five years since the crash.