The Importance of Raising Cash
There may be no better feeling than locking in a huge profit as the market soars higher; in fact that's as good reason as any to sell into a rally.
However that's not the only reason to sell.
Jim Cramer also recommends selling into strength and raising cash because it prepares you for the next decline.
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After it rallies the market tends to pullback, Cramer reminded.
And Cramer said when the market goes lower, that's when you'll want to make a shopping list, establish new entry points and then pull the trigger when you think a desirable stock has gotten too cheap.
Therefore, you'll want to have cash.
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Cramer recommended having at least 5 percent of your portfolio in cash most of the time, and up to 10 percent after a market decline. This gives you the flexibility you need to take advantage of those declines, buying your favorite names at a discount, he said.
In fact, Cramer said that not selling something during a rally to raise cash is "downright reckless" — no matter how much you love the stocks in your portfolio.
And he thinks selling right after a rally — when a lot of other investors still want to jump in — might be best.
What's the bottom line?
Cash may be "the single most important part of your portfolio," said Jim Cramer. And during a rally the market is giving you an opportunity raise some.
"It's the smartest thing you can do," he said. "And it will save you a lot of pain."
Call Cramer: 1-800-743-CNBC
Questions for Cramer? madmoney@cnbc.com
