Action Alerts Plus portfolio manager and TheStreet's founder Jim Cramer has learned a lot over his 30+ years of investing. So he created a list of 25 Rules for Investing that can help you avoid the novice pitfalls that even he fell into on occasion.

One of the many things he believes is that "if you control the downside, the upside will take care of itself."

And the only way to control the downside is to diversify your portfolio. 

Rule 5: Diversify to Control Risk

Sector risk is one of the biggest mistakes investors make.  If you have all your eggs in one sector, you get scrambled, he says.

"If you can mix up enough different sectors in your portfolio, you can't be hit by one of the myriad perfect storms that come our way far more often than you would think."

That's why Cramer believes that diversification is the only investment concept that truly works for everyone.  

Watch the clip above to hear why!

 

We'll roll one-rule-a-day for the next 25 days!

Sign up and watch Jim Cramer's 25 Rules For Investing here!

More from Video

Video: Here Is Why Carvana Isn't Worried About Amazon

Video: Here Is Why Carvana Isn't Worried About Amazon

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

Flashback Friday: The Market Movers

Flashback Friday: The Market Movers

This Could Be the Summer of Hard Seltzer

This Could Be the Summer of Hard Seltzer