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This program last aired July 2, 2015.
NEW YORK (TheStreet) -- Nobody likes to play by the rules, Jim Cramer told his Mad Money viewers. But with investing, rules can protect you from your own bad judgment.
Cramer said people are always asking him whether he worries about the stocks he owns. The answer is, of course, absolutely. He said that everyone worries about their investments, especially when your investments are heading lower in an up market.
But that's why Cramer said he believes in active money management, staying nimble and flexible to always keep your money working for you and not against you. The first step in that process is finding out why your stocks aren't performing as you expected. Cramer said you need to do your homework because you can't be informed if you don't inform yourself.
Once you know what's gone awry with your favorite stock, what do you do next? Cramer said investors typically make two mistakes at this point: they end up owning too much stock so they don't have any cash left to buy into the decline, or they like all of their stocks equally so have no inclination to sell.
Cramer said investors should always have cash on hand to buy more, if that's what they deem necessary, and they should always rank their stocks from best to worst. That way if your best stock is going down you automatically know to buy more, but if the worst one is dropping you can cut your losses early.