Cash is king.

That’s why Cramer’s always badgering Homegamers about having some on the ready. At least 5% of your holdings, he said, maybe 10% if the market’s dipped. You can’t take advantage of the cheap prices that come with a downturn if you’re fully invested.

Market rallies are a perfect chance to raise cash. And it’s downright reckless if you don’t use the opportunity, Cramer said. You can always buy back even your best stocks later at lower prices with the cash you raised.

Of course, you can’t raise cash if the bullish feelings that come with a rally talk you into buying stocks. Don’t do this! Sell high, and you take advantage of the rally. Buy high, and the rally takes advantage of you, Cramer said.

The bottom line: There are two rules for rallies – raise cash and don’t buy.

Questions for Cramer?

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