Stocks: How many is too many?

(Click for video linked to a searchable transcript of this Mad Money segment!)

Can you own too many stocks? Absolutely.

If you're an individual investor trying to make your way in the stock market you may be tempted to hold a large number of stocks.

After all, Jim Cramer as well as other market pros always talk about diversifying risk and what better way to do that, than own a wide range of stocks.

However, diversification and owning a large number of stocks aren't the same thing.

"Unless you're running a mutual fund, there's no reason to own a large number of stocks," insisted the "Mad Money host. Instead, "I want you to hold only ten, high-quality, diversified names," he said.

Kutay Tanir | Vetta | Getty Images

Largely Cramer thinks if you hold more than 10, you won't be as informed as you need to be to succeed. "More than ten and you will likely start skimping on the homework, and that's incredibly dangerous," Cramer said.

By homework, Cramer means the research that's necessary to keep yourself abreast of all the catalysts in the market that can move the stock. It involves examining earnings reports, reading news stories, and parsing through Wall Street analysis.

And that's time consuming.

"Homework means committing one hour per week per stock," Cramer said. "Much less than that, and you might as well be gambling." And few people can commit more than 10 hours per week.

"Therefore, I say you can't handle thirty stocks, even twenty is like having a part-time job. Ten, however, is just right," Cramer said.

Read More from Mad Money with Jim Cramer
Broke, Cramer had this financial epiphany
Top stock picking secret, revealed!
Cramer's first fling with stocks

In addition, there's another tenet of trading the Cramer advocates – "don't own too many low dollar stocks at once," said the Mad Money host.

Cramer recognizes it can be tempting to speculate on these relatively inexpensive stocks – the upside may be significant and you can buy 100 shares for a relatively affordable amount of money.

Nonetheless, Cramer thinks spec stocks such as these should only be a small part of the portfolio. "They keep you engaged, but largely when a stock falls below $10 it's a signal the company isn't doing well."

* Although we all love curling and the Olympics on CNBC television, if you're still looking for money making insights from Jim Cramer, you'll find plenty right here on Mad Money's website. We've scoured the archives and selected favorite articles and videos that are both timeless and relevant; information you can use right now. Look for something every day.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com


Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.

Cramer's New Book