Cramer's Rule: 'When the Facts Change, I Change My Mind'

Jim Cramer
Jim Cramer

Investors can avoid some of the most common and money-losing mistakes in any environment by following five easy rules, "Mad Money" host Jim Cramer said Friday.

"If you follow my rules, you should be able to recognize an opportunity when you see it and to manage to avoid losing money when you don't have to, no matter what the circumstances, including a collapse in Europe or a slowing in China or even a skyrocketing oil price," he said.

Rule No. 1: "Don't dig in your heels when you're wrong."

The late, great economist John Maynard Keynes always said, "When the facts change, I change my mind." Cramer has adopted the quote as his personal mantra. After all, he said one of the easiest mistakes to make is refusing to change your mind when the facts are in and you've been proven wrong. It's one of the most difficult things for the most emotional investors and traders to do, but also crucial to becoming a good investor.

"Swallowing your pride is never easy, but the more time you spend digging in your heels, the less you have to take advantage of the new situation and profit from it," Cramer explained.

Read on for Rule No. 2

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