Cramer has always had the notion that excessive prudence can be one of the most reckless strategies of all. If too much money is invested in safe, risk-free U.S. Treasury bonds, that basically insures a very low return on an investment. So, for those who want to grow their capital, stocks are the only game in town.
Stocks are a tool to make money, Cramer said, and bonds are for capital preservation — for protecting money and providing a small, steady return that can offset the impact of inflation.
"Depending on how old you are, there is a huge difference in how you should approach the very idea of putting your money in bonds," Cramer said.
How much of a retirement portfolio should be kept in bonds versus stocks? Cramer broke it down by age:
- 20s: None
- 30s: 10 percent of your retirement fund; 20 percent if you are conservative
- 40s: 20 to 30 percent
- 50s: 30 to 40 percent
- 60s: 40 to 50 percent bonds
- Post-retirement: Increase bond exposure to 60 to 70 percent
Additionally, Cramer doesn't subscribe to the "buy and hold" mantra that most do. He's all about "buy and homework." That means that no matter how confident one is in a company, they must keep checking up on it regularly to make sure nothing has gone wrong in the story.
When taking these investments into consideration for the long term, one thing became very apparent to Cramer: if you know what you're doing, a bear market is an opportunity.
A bear market refers to when the averages are down by more than 10 percent from their highs and seem like they could go lower.
"What I am saying is that when you are faced with a bear market … it probably makes more sense to start buying most stocks, rather than selling them, as long as you are willing to take some short-term pain," Cramer said.
The key is to be patient enough to take advantage slowly — so you don't buy too close to the top — and to be careful about the stocks chosen in a bear market. Do your homework and pick the stocks of companies that are doing well, or doing OK and could be doing better in a stronger environment.