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Cramer: How to Make Money in the Market Just Changed

Wednesday, 19 Jun 2013 | 6:03 PM ET
Cramer's Fed Takeaway
Wednesday, 19 Jun 2013 | 6:00 PM ET
If you want to make money in this market, it's time to think about buying industrial, bank and tech stocks instead of the high yielding stocks, explains Mad Money host Jim Cramer.

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

The market may have just reached an inflection point. The way in which you make money going forward could be substantially different.

For quite some time, stocks that generated good yields were relatively safe and attracted new buyers on a regular basis because the so-called dividend yielders had little to no competition.

However, on Wednesday, the paradigm shifted in a big way. Ben Bernanke hinted that the economy appears to be improving to a point where the Fed could start winding down its bond buying program by the end of this year and wrap it up entirely in 2014

That's a game changer.

In an attempt to goose the economy, the Fed has been implementing stimulus that's driven interest rates sharply lower. For example, in July 2012, yield on 10-year Treasuries hit 1.394% an all-time low.

With Treasurys generating such a paltry return, dividend yielding stocks were the only game in town.

Adam Jeffery | CNBC

However, if the Fed views the economy as strong enough to wind down its stimulus program, interest rates are bound to rise. Therefore, Cramer believes other kinds of investments, will begin to attract money that's currently parked in dividend yielders.

"This is a sea change," Cramer said. "Therefore, investors should no longer buy stocks simply for their dividends. They are no longer offering the protection from declines that they once did."

Instead Cramer said investors should begin to establish positions in the stocks of companies that benefit from accelerating recovery. They are the industrials, the banks and the techs," Cramer explained. Those are the stocks that are about to come back into favor.

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Read More from Mad Money with Jim Cramer
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Again, that's a major shift and one which is so important it bears repeating.

"Buying stocks just for large dividends, the way so many people have done for the last four years, is now over at least until those stocks drop much more than they have to date. Buying stocks for companies with improving profits because the economy's improving? Those are the investments that will work best for the rest of 2013," Cramer said.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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

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