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Cramer’s Sell-Off Playbook

As horrible as they may seem, sell-offs are inevitable, Cramer said. But instead of panicking when a downturn happens, investors should see opportunity.

There’s always a bull market somewhere, and there are opportunities in every market. That’s especially the case during a correction because stocks go on sale when the market drops. So instead of gnashing their teeth for not sidestepping a sell-off – an “amateurish pipedream,” Cramer called it – investors should take the chance to buy great companies on the cheap.

This is why Cramer recommended having at least 5% of a portfolio in cash. So investors are ready when it’s time to pounce. If stocks have had a bigger run than usual, meaning some type of correction could be coming, 10% might be better.

The bottom line: Big declines will always happen. But smart investors with readily available cash can take advantage of them.

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  • Jim Cramer

    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."

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