Cramer: How to Buy Stocks at the Right Price

One of the most important elements of successful long-term investing is knowing the right price for a stock, “Mad Money” host Jim Cramersaid Friday.

“As a long-term investor, you've got all the time in the world,” he said. “Now, when you want to buy a stock because you like the underlying company’s prospects, and when there are no near-term catalysts that could drive the share price up anytime soon, you can afford to be patient.

“You don’t have to pay the price the market’s giving you right at this moment. You can be patient and wait for the stock to come down to your price.”

Cramer added that there’s no all-clear signal for any stock.

“This is one of those areas where you have to embrace the fact of your ignorance,” he said. “That’s why I tell you to buy your stocks in increments, loading up gently and over time. If you buy all at one level and then the stock goes down even further, you're going to feel like an idiot for losing money so quickly.Most likely you'll get frustrated and dump the whole position a point or two down instead of using the weakness to buy more.

“In short, there is no right price. But if you build up your position in small increments, patiently picking up more shares over weeks and months, then you can avoid paying the wrong price.”

Also, since it’s practically impossible to call a perfect bottom in an individual stock, Cramer said he preferred to buy on the way down with wide scales.

“Consider it your insurance against the potential bad judgment of thinking you know the stock’s really done going down and you want to be all in because you are so cocksure that you’re getting in on the ground floor,” he said. “In this game you have to presume there is a basement, if not several sub-basements.”

Similarly, he added, investors ideally will want to sell into strength.

Timing, Cramer said, is everything: “Be patient, keep your bat on your shoulder, and wait for the right pitch.”

Related:

• Cramer: Long-Term Investing Requires Focus
• Know Your Stock’s Sell-By Date, Cramer Says
• Cramer: ‘Most Company 401(k) Plans Stink’
• Cramer’s Tips for Spotting Secular Growth
• Cramer: Find Your Mix of Trading and Investing

@MadMoneyOnCNBC on Twitter

"Mad Money" on Facebook

Call Cramer: 1-800-743-CNBC

Questions for Cramer? [e-mail]

Questions, comments, suggestions for the "Mad Money" website? [e-mail]