Jim Cramer's Investing Rule 5: Diversify to Control Risk

Action Alerts Plus portfolio manager and TheStreet's founder Jim Cramer says the only investing concept that works for everyone is diversification so it is Rule #5 of his 25 Investing Rules. Watch now for more on how putting all your eggs in one basket can get you scrambled, he says!
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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!

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

Watch More of Jim's Rules for Investing: