Now, it is time to review Cramer's rule of separating the stock from the company. He frequently says "look for broken stocks, not broken companies."
But the stock is the company, right? No. There are lots of bad companies with bad stocks. There are also lots of good companies with bad stocks. An investor's job is to figure out the difference, so they can identify a bargain.
"I go after the stocks with the best fundamentals that happen to have been beaten up even as nothing's wrong at all with the companies," Cramer said.
He spots these stocks by circling back to companies that have just reported earnings, because he knows those fundamentals are intact.
Every week on "Mad Money," Cramer plays Am I Diversified with his fans. A caller will provide five stocks, and he will give his take on whether the portfolio is diversified.
Every. Single. Week. Why? Because diversification is important.
Now five stocks is certainly not enough, and Cramer knows that the human brain isn't wired to want to be diversified. After all if Tesla had a hot run, wouldn't you want to buy nothing but Tesla, Tesla and more Tesla?
Cramer gets it. But having a diversified portfolio is more important than making a few dollars. Because eventually that stock will get too hot, and your portfolio will go down in flames with it.
So, before buying a stock, Cramer wants to make sure there is a proper sounding board.
"As I love to say, we are all prone to make mistakes, sometimes big ones. One way to cut down on these mistakes is to force yourself to articulate why you would like to buy something," the "Mad Money" host said.
When Cramer worked at his hedge fund, he asked people eight questions. A few questions are:
No. 1: What's going to make this stock go up, besides the stock market?
No. 2: Why is it going to go up? Is there something time sensitive?
No. 3: Is this the best time to buy it?
Without a sounding board, you could get yourself into trouble. Really in a jam and don't have anyone to ask? Just call Cramer on the lightning round.
Read MoreCramer's 8 questions every investor must ask