Cramer's 'Mad Money' Recap: Timing Is Everything (Final)

Cramer recounted how he learned his lesson about not selling everything. He said in the 1990s he held shares of American Stores, the old Acme supermarket chain, hoping the company would be taken over. After years of losses, he finally gave up and sold all his shares, all at once. Just two weeks later, American Stores was taken over. Cramer said his mistake was selling it all.

Know What You Own

Cramer's next tip for investors, know what you own. He said in today's media-driven world, investors simply should not own a stock unless they know WHY they own that stock. Why? Because the media has never met a negative story it didn't like.

Whether it's the tsunami in Japan or the European financial crisis, Cramer said that investors should just assume that every story they see on TV or read in the papers has been exaggerated in some way. So unless investors know why they own a stock in the first place, it will be far too easy for them to bail out on their stocks at the first sign of trouble.

Cramer recounted what he used to call his "Bristol-Myers Theorem," derived from Bristol-Myers Squibb (BMY) , a drug company with the most consistent earnings imaginable. He explained that back at his hedge fund, anytime an associate would run in panicking about a negative story, he would always ask, "how does that effect the earnings of Bristol-Myers?" In just about every case, it didn't. That's why Cramer often recommends reliable, consistent-earning stocks with great dividends, stocks like Kinder Morgan Energy Partners (KMP) or Verizon (VZ) or utilities such as Southern Company (SO) . Cramer said no matter what the negativity of the day, companies like these will allow investors to put those stories into perspective.

The Dangers of IPOs

Next up on Cramer's tips for investors, the dangers of IPOs. Cramer said that he's often asked about the next hot IPO coming down the pike, but his answer is always the same, "what price are they offering and how many shares are there?"

When it comes to IPOs, Cramer said it's all about valuation, how many shares are being offered and at what price. He said what starts out as a great offer at $20 a share, can easily get hyped to $25 a share right before it comes public.

The IPO business also has a habit of limited the number of shares offered to ensure a big first-day pop in the share price, a pop that will only hurt investors later. Cramer said his usual advise, if you can get in on one of these "sliver" offerings, do so, but nerve buy them in the aftermarket.