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When Investing, Timing Is Everything

One of the most important and often frustrating parts of managing your money in the stock market is figuring out exactly when to buy and sell stocks, Cramer said. So to help his “homegamer” viewers become better investors, the “Mad Money” host shared some lessons he’s learned in his more than 30 years of trading.

To start, Cramer said investors should almost never sell when the market is taking a beating and everyone is panicking. Inversely, this is often the right time to buy. After all, if the indices are sinking, investors can get stocks at a discount to where they were recently trading. Whether it was the sell-off following the Japanese nuclear crisis in February 2011 or the ‘flash crash’ of May 2010, the aftermath of 9/11 or the stock market crash of 1987, none of these events had been the right time to sell. Instead, Cramer found prudent buying had later proved profitable during these times of maximum fear.

“The only time, actually, that panic made sense, was to sell into the morass that was 2008 because the financial system was on the brink of the collapse,” Cramer said, adding it was a systemic crisis rather than a temporary one, so panicking made sense then. “Buying actually hurt you because stocks just kept falling and falling, so you never got a chance to unload the merchandise you bought on the dip at a higher price.”

Investors who took Cramer’s lead and sold in September 2008 avoided an almost 45 percent decline, he noted. But again, this is the only time that Cramer thought selling into panic was a good idea.

Most of the time, it’s a smart move to buy when people are panicking. In volatile or turbulent markets when things don’t look pretty, Cramer recommends being patient. Investors have to keep their head because there will likely be a better momentum to sell. The right move is almost always to buy into weakness, so he suggests keeping that mind the next time there’s a pullback.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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