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Rule 8: Buy Best-of-Breed Companies

In cars, we buy best of breed. Not even an issue.

We pay up for the brand because we know that a brand, a good brand, signifies reliability.

It signifies a higher level of service, a quality of ownership that can pay dividends for years.

So why don't so many of us feel that way in the stock market?

Why are so many drawn to the penny stocks that are constantly being talked about on twitter,

or the stock of Twitter itself
and its doppelganger Snapchat
when they could buy the stock of Facebook?

I think it is because they can't resist what they PERCEIVE as a bargain.

But most bargains in the market -- unless caused by sudden, unrelated, sell-offs 'Äì often lead 'Äì

not to gains -- but to losses.

That's why you will always hear me say on the Lightning Round, if you like blah blah bah you will really like Johnson & Johnson because that is best of breed,

Sure your stock may give you some momentary pyrotechnics.

I, on the other hand, am talking about buying stocks with great balance sheets
long histories of dividend boosts
and strong pipelines and principles.

That -- not the penny stocks or the bargains -- is the best way to accumulate long-term wealth.

Remember, there are very few bargains out there in the world of secondary and tertiary players.

I believe that when it comes to price-to-earnings multiple,

investing in the more expensive stock is invariably worth it because you get peace of mind.

That's why I say:
Own the best of breed;
it's worth it
and you will almost never regret it.

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.

And one of them is not buying the best company in a particular sector. 

"We know that a brand, a good brand, signifies reliability." And that happens whne you go shopping all the time - from handbags to cars.

But that mindset often doesn't transfer to the stock market.

Cramer thinks it should.

Rule 8: Buy Best-of-Breed Companies 

"I believe that when it comes to price-to-earnings multiple, investing in the more expensive stock is invariably worth it because you get peace of mind."

So watch Cramer talk about Rule #8 above -- and why you too should own the best of breed.

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

Watch More of Jim's Rules for Investing: