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Jim Cramer: Always Heed This Investing Credo

Cramer's learned a lot about investing and markets over the span of his long and illustrious career, but of all those things, he said one lesson may be more important than all the others.

And he said it boils down to one word.

"One magic word - diversification," said Cramer.

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That's right, Cramer believes the single most important concept in investing has got to be diversification. "No matter how good things may look - at some point in time the landscape will take a turn for the worse," he said.

Now let's be clear, "I'm not telling you to be afraid," he said. "I'm not saying you should be a super skeptic or a permanent bear. Not at all."

But it's extremely important to be prepared.

"The next catastrophe is always just around the corner," said Cramer. "You have to build that kind of outlook into your worldview. You have to assume that somewhere, sometime, something will go wrong.

Don Bayley | E+ | Getty Images

And diversification is a good way to weather the storm.

"If your portfolio is properly diversified, then you can handle just about any setback," he said. "You can come back from any financial disaster."

Of course that begs the question - how do you properly diversify?

Although the process can be involved and complex, Cramer has simplified it to a few key rules.

"Make sure that no one sector or segment of the economy accounts for more than 20 percent of your portfolio," he said.

Also, Cramer said to spread out investments into five distinct areas; gold, a dividend-paying stock with a high-yield, a growth stock, a speculative play and a foreign play. Read More: 5 Things That Should Be in Your Portfolio Now

"Cover these bases and you'll have a portfolio that can win in any market," Cramer said.

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Read More from Cramer
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5 Things That Should Be in Your Portfolio, Now
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