the run ends friday. >> i will be back tomorrow. remember special coverage 10:00 p.m. i will be hosting. check us out at 2:00 p.m. and then i'm jim cramer. welcome to my world. >> you need to get in the game. >> firms are going to go out of business, and he's nuts. they're nuts. they know nothing. >> i always like to say there's a bull market somewhere. >> "mad money," you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you money. my job isn't just to entertain but i'm trying to educate you. call me at 1-800-743-cnbc. in the face of crushing declines and uproarious rallies and even sometimes just plain jane garden variety days in the market, there is a "mad money" toolbox to help you through it and to help you become a better and

wealthier investor. tonight i'm cracking it open, so listen up. if you're going to manage your money you have to recognize the value of one of the most important issues out there. the value of humility. repeat after me. sometimes i'm going to be wrong. say it. sometimes i'm going to be surprised. one more. sometimes my stock picks just won't work out. [ buzzer ] i of all people understand humility doesn't come naturally but staying humble is important. why? other than greed nothing costs people more money than arrogance. if you own stocks you have to accept the fact that you are going to be wrong, perhaps even often. [ booing ] as the past three years have taught you painfully. [ house of pain ] your portfolio will be hit with things you never imagined, never thought possible. to put it another way one thing you can be sure of when putting a portfolio together is at some point things will go wrong.

it will hit you out of left field or worse, something bad will happen that could have been anticipated. unless you took the appropriate precautions you will end up run over by a train that you actually saw coming. >> all aboard! [ train wreck ] >> think about how often we have been clobbered by the mess in europe. when things look less horrible every time we wonder, maybe, just maybe the worst is past there is hideous headlines out of europe, spain, greece or italy and it comes back with a vengeance and the s&p 500 is bashed down by selling. [ screaming ] that's why it is important to prepare yourself and stocks for the next catastrophe, expected or unexpected, so you can make money in any market or at least lose less. you have to build this stuff into your world view. you have to assume somewhere, sometime something will go wrong. i'm not saying you should be a

super skeptic permabear, not at all. i have seen averages climb too high, watched the market make people too much money to be that cynical and closed-minded. being negative has not been a lucrative strategy. i don't see a reason that should change now. there are professional short sellers out there. hats off to them. they have turned pessimism into profits but i don't recommend trying to follow them at home. uh never recommend short selling. out's more risky than being long. it's just a basic question of arithmetic. when you short a stock or bet against it at best the stock goes to zero and you have 100% gain. at worst it could never stop going higher. you could lose 200, 300, 1,000%. you could lose infinite money if you're short. when you own a stock the most you can lose is 100% of your

money but you can quintuple your investment. ask anybody who bought apple near the generational bottom in march of 2009 when it pulled back to less than a hundred bucks. over the next five years they scored a 580% return. [ applause ] ♪ hallelujah >> that was easy. >> i'm not telling you to be afraid and pass up on that gain. it would be silly not to make sure you are prepared for the next market disaster. we know these things happen. we shouldn't let them stop us from trying to make money but we should protect our investments in advance. how do you get ready for a calamity when you may not know what it will look like? how do you expect the unexpected as an investor. one magic word. diversification. it takes people -- i can't make

thousands of percent with diversification. it's the most important key to avoid losses and stay in the game which is the goal. that's why i play am i diversified on wednesday, why i call it the only free lunch in the original investing gospel, jim cramer's real investing. why i push so hard in getting back to even. if your portfolio is diversified you can handle any setback. you can come back from any financial disaster. i mean it. normally i mean making sure all your stock eggs aren't in one sector bass celt like i saw in 2001, 2002 when people left the building because of technology stocks. it means no one sector, one segment of the economy should account for more than 20% of your portfolio. if you own five stocks only one can be tech, health care, financial, energy, industrial

and only one food & beverage. what if you're not sure? err on the side of caution. if two stocks trade together you're not divert identified. an oil driller and producer, we get that on wednesday. they're both part of the same sector. software and hardware are both techs whether we like it or not. i'm not trying to make it difficult for you to pick stocks. when you get too concentrated in an area the moment something bad happens you will want to throw yourself off a bridge because the losses will be enormous. imagine if you own too many industries. fast growing emerging markets like china slammed on the brakes with higher interest rates. you got obliterated. what about if you owned too many banks before the financial crisis. people had such good yields. too many stocks into the dot come bust. something soured an entire generation. the goal of diversification is

to spread your money in unrelated sectors so when one goes down hard the rest are unscathed. sometimes they go higher. that's diversification. it is mandatory in cramerica. you know what, if you're going to be prepared for anything it's not enough to make sure your stocks don't overlap. you need a portfolio that lasts in all markets. it's what i call the new diversification. how to protect your wealth and ensure you own something that works in a chaotic, difficult, unforgiving, nauseating, miserable market. we are diversified bisector alone and it's not enough. it's all about the right kinds of stocks. there are five areas you need to cover for maximum protection and upside. you need gold, a dividend stock with a high yield, growth stock, speculative. i believe in that. and something from a healthy geography. cover all five bases and you have a portfolio to win in any market. i will explain what makes the areas so essential. teach you to analyze stocks by

yourself so you can fill every position with the best possible names. bottom line. a good investor knows to expect the unexpected meaning staying diversified with 20% of holdings in one sector and following the new diversify fi indication. speculative, geographically safe. stick with cramer and i will tell you how to pick the best plays in each crucial category. loretta in arizona. >> caller: hey, jim. thanks for taking my call. >> my pleasure. >> caller: regarding your suggestion of not investing more than 20% of your portfolio in any one sector, does this only apply to portfolios with individual stocks or do you calculate in the stocks which are within your mutual fund as well? >> okay. that's a great question. we don't talk much about mutual funds on this show. if it is divert identified

basically you can say, why do i need to pick individual stocks? that's why we have "mad money." a lot of people like picking individual stocks. i'm not encouraging or discouraging. here's how you do it if you want to. keep the mutual funds aside. it's great to have a bedrock mutual fund. i have it in my 401(k). i don't think you can relate the two. it's separate. tom in california, please. tom. >> caller: hi, jim. calling from sunny warren, san diego. >> i like the dax. >> caller: i'm a financial adviser who appreciates what you do to educate investors. >> thank you. >> caller: i wonder if you would share what your objective criteria are for determining best of breed. thank you. >> best of breed, i start with a record of dividends. then i go to how a company has done consistently in good and bad times. yes, for best of breed i look at the product. is the product something i would want to use, a bank i want to go

to? to use the danny meijer phrase, is it the one that's most hospitable to shareholders? new diversification is important. it's what we are preaching tonight. make sure your portfolio is home to gold, a high yielder, the growth stock, a -- you know, then you need geographically safe area for one of them. i'll teach you how to pick the best ones. i want you comfortable with your portfolio. "mad money" will be back. >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.

tonight i'm teaching you a novel way to fill those five slots in your portfolio, the five types of stocks that represent new diversification, not just bisector but by style and strategy so if executed

correctly you will always own something that works and holds your interest, keeping you in the game even when it feels so excruciating you don't want to stop looking at your statement when at the same time you have positions that will go higher. what's the most important category? yield. you need to own at least one stock, possibly more with a big high yielding dividend. unlike diversifying bisector owning multiple high yielders could be a good thing. i wouldn't own five dividend stocks because then you could be vulnerable through bonds or if taxes went up. your whole portfolio could get hurt. if you own one stock with a really large yield and one or two of the others have decent dividends once they get raised that's not bad. i know dividend-paying stocks may not be what people consider sexy but dividends make money. to me that's the definition of sex appeal.

i have a warped social life. my perception may be skewed but buying high yielders and reinvesting back into the stocks is one of the greatest most reliable ways to make money. it allows the investment to compound over time. in other words, over time the money from past dividends pays dividends giving you compounding terms. there is a misconception about this. people think high yielders are about safety or generating income in retirement. if you go back to january of 1926 the, 40% of the return from the s&p came from reinvested dividends. percentage is even high. of course the income stream but that's wall street gibberish for growing money. dividend stocks aren't just a place to hide but they represent a fabulous safe haven in difficult markets. they are not just for retirees who only care about capital preservation, but they do a terrific job. investing in high yielders is

one of the smart strategies for making money and one of the safest since dividend stocks have a yield support which helps them hang in there when everything else is getting eye anyway lated. eventually it gets to a level too attractive for most to ignore. devoted a chapter to it in surviving and thriving. that cushion is the reason why i like accidental high yielders. i call them a.h.y.s. when you can find them. these stocks yield north of 4%, not because of dividend boosts but because the share price is falling so far, so fast causing the yield to skyrocket. we have seen them bottom or at least slow counseling. happened during the financial crisis provided they could pay the dividend. we have seen it in big industrial stocks hammered by european woes. once it hits 4% backed up by the cash flow the stocks tend to slow or stop. they are a fabulous bargain

longer term. i like the stocks in companies that have raised dividends. it's one of the clear signals about the strength of business. a company that can raise the dividend has a steady growth. also a company that you can be sure won't be cutting the dividend any time soon. even better are outfits with dividend increases for 20, 30, 40 years. that's stability and that's part of it. other than accidental high yields how do you analyze a high yielding dividend stock? think safety first. high yielders are attractive but we never reach for yield. a very high yield can be a signal that the dividend is unsustainable and will have to be cut. that's why we have to put stocks through a rigorous safety inspection. i'm throwing the red flag. the dividend is sound maybe they can raise it, but if it seems in danger, [ sell, sell, sell ] you have to sell. consider two real household

names. radio shack and super value. in the first half of 2012 stocks were pounded so hard the yields were in the stratosphere. in each case the yield was a red flag flag. sending a signal that the payout would be cut. sure enough they e lum nated dividends and the stock fell through the floor. with super value the ceo told me a year before he cut it that the dividend was safe. what do you look for? first, above and beyond everything else we look at earnings per share. if earnings are greater than twice the dividend payout they can sustain it when earnings shrink. i think you're almost home free. you can't be certain about anything but the dividend is secure. if not, go to step two. the cash flow is important in dealing with companies with heavy capital investments. cable companies cause them to

repeat high yield. smun indications networks don't come cheaply. these depreciation and amortization costs don't come out of cash. they do skew the earnings lower which is why the cash flow can give you an idea about the health of the dividend. a lot of callers say why do you like at&t? it's the cash flow. you have to look at the balance sheet to be sure there isn't debt coming due in the near future that can necessitate a dividend cut. lastly you have to know how to collect the dividend. forget all the jargon like record date, x date, declaration, no. on "mad money" we care about one date with dividend es, the must own date. the last day you have to buy the stock in order to claim the next dividend payout. it's the day before the x date. if you want to be prepared for every kind of market out there

you must own at least one high yielder. dividends protect your stocks. they are also a terrific way to make money. what's not to like? mary in missouri, please. >> mr. cramer. i read in the wall street journal a small article on the dividend bubble. i would like to know what that is and how it might affect my utilities dividend income. >> i'm glad you asked me the question. for two years now most of the cognizanti have been saying it's going to crash. all a that happened is interest rates went lower and the dividend got more attractive. the dividend bubble is something i don't think exists. we are not paying much. there is not much interest in the stock market vs 10-year or 30-year, you're fine. it's a competitive situation. ron in texas. ron. >> caller: yes, sir. >> what's up? >> caller: so how do you know when to get out of a stock? say you are doing well. it's got a dividend but -- how

do you know? >> one of the things we like to do is stay in touch with the fundamentals. we don't do buy and hold. we do buy and homework. if you see that the company has a change like a cfo leaves, ceo leaves. in general we don't like to be greedy. bulls make money, bears make makeup and hogs get slaughtered. if you can make enough money to play with the house's money you're golden. your portfolio should be able to dividend and conquer. make sure you have one high yielder. that will help with diversification. after the break we'll try to make you even more money. this country was built by working people.

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negative nancy hat. in the words of joey brown in "some like it hot" nobody's perfect at least when it comes to investing. it's not like i like making people miserable -- well, a little bit. i'm not trying to make you hate stocks in the wake of the flash crash, botch eed facebook ipo. so many examples of insider trading it's hard to count. i'm trying to help you cope with your ability as an investor to avoid losses or the whips and scorns of european politicians. to paraphrase the bard while putting yourself in a position to maximize profits when things are going well and you know we have to do it. the discipline of diversified portfolio always trumps your conviction. always. used to have it on my pc. by never having all your eggs in

one sector basket you never have to suffer through watching everything you own get crushed and the basket getting run over by a truck or a train. what if uh you want more protection against a volatile market. that's where the new diversification comes in. diversification by strategy. just like immunizing bisector, being diversified by strategy ensures no matter what market we are in you will likely own something that's working. i have said you should reserve one space in the portfolio for a high yielding dividend stock. now you need a growth name. especially a secular growth stock on wall street secular has nothing to do with public versus parochial schools or establishment claus in the first amendment which i question. no. on wall street when a company has secular growth unlike

cyclical smokestack growers they will keep on expanding during a slow down because they have something special going. when you get a strong secular grower the stock can lift higher and higher. going on the new high after new high for as long as growth lasts. back when big pharma was synonymous with growth not just high dividend? how do you analyze growth? we are paying for expected future earnings per share. i will repeat it. expected future earnings -- not past -- future. a lot of people say the past looks cheap. future earnings. the basic valuation algebra. sale price, p, equals earnings per share, e, times what is known as the multiple, m. price to earnings multiple.

e times m equals p. that tells you what investors fork over for future earnings. blew me away at goldman sachs. we're solving for m. the most important determinant of price to earnings multiple. it's the company's growth rate. that's why we pay so much attention. we'll pay a bigger multiple for businesses with faster growth because the earnings will get larger in the years ahead. as a rule of thumb, when it comes to high octane secular growers the stock can trade up to a multiple as high as two times, twice the long-term growth rate before it gets too expensive for the vast majority of money managers who have money coming in. if the company is growing at 20% the stock could fly as high as 40 times earnings. typically a growth stock won't trade down to one times the

growth rate unless there is something wrong with the fundamentals or we are in a nasty market soured on growth. possibly because of higher interest rates, inflation. that makes multiples and growth stock shrink compared to the yields people can get from cash, treasuries or plain hard cash because of inflation. by the same token, lower rates make growth stocks more attractive and cause the multiple to expand. more important with a high growth stock you need to be sensitive to which direction the earnings estimates are going and whether they are increasing at a faster or slower pace. these stocks can soar to new highs but remain cheap as long as the analysts who cover them are raising earnings per share quickly enough. when estimates have momentum. a stock like apple can double over the course of 12 months and the multiple would be lower than where it started. this kind of earnings momentum allows stock to resist the downward gravitational pull of

the economy. secular, not cyclical growth. be careful. when you play momentum, you're playing with fire. for the truly high octane growth stock ifs the time comes when estimates go down or growth is decelerating, splat. it's like driving a fast car right into a retaining wall or a stock goes through a painful

process. yep. years as momentum-seeking investors pay less and less. all the growth managers are shaken out and the multiple sinks to areas where the badly invested can take over. don't hang on for the full ride down. just sell. you can catch out later. the bottom line. to build a portfolio that works in every market you need a fast grower, preferably a secular growth stock with room to run. when dealing with growth it's worth it to pay up for a country that's sill accelerating. when momentum slows down the multiple can shrink for ages before it bottoms. logan in texas. >> just want to give you a big university of tulsa, oklahoma, boo-yah. >> i'm loving that. what's on your mind? >> caller: a couple weeks ago i was watching a similar show where you told us about a p.e.g. ratio and how to use it to determine if a stock is expensive or not. i was wondering, what does it

mean when a stock has a negative p.e.g. ratio? is it a company to avoid? what are other indicators to see if it has room to growment. >> i like to switch -- this is a concept i covered in "getting back to even." there are times you have to go to cash flow. if there are no earnings you say what kind of growth, but if there is cash flow growth like the cable companies and telcos, you can figure that out. frankly, i will be candid. the p.e.g. ratio, i like it for traditional earners. let's go to frank in pennsylvania, please. >> first and foremost, boo-yah. >> boo-yah back. >> caller: i have a three-part question. what does the term risk on, risk off mean? are these a signal to stay away from a stock? >> all right. i have been at it more than 30 years. this risk on/risk off is offensive to me. it's offensive to me because i

think it obfuscates what i need to teach you. it's gibberish. who knows what's a risky stock, what's not? i know stocks. here's what you need to know. it's not risk on, risk off. it's do i have cash or am i borrowing money? do i have cash or am i buying high value stocks? you will never hear risk on, risk off here. it confuses you and tries to make me sound smart, but it tells you i'm stupid. risk on, risk off, not in cramerica. growing pains? not around here. you need a fast grower as part of your new diversified pattern. this is new diversification. out's worth it to pay for a company that's accelerating. if it decelerates, just go. stay with cramer.

tonight i'm focused on different kind of stocks showing you how to put together a portfolio diversified by strategy, a tool box that can work in any market no matter how difficult. so far i have talked dividends and growth. what else? how about something to keep you interested in focusing on opening your statement at the end of the month? in my view you want to own something, i know, something speculative. even as speculation has to be the dirtiest word in the business. except in cramerica. ♪ where as part of investing orthodox not only is it okay to own tempting stocks in the single digits, i regard it as a necessity as long as you follow the rules and speculate wisely i

don't fear criticism talking about it. it's made my investors a lot of money in my old hedge fund. i realize this is the opposite of everything you have been told by the usual purveyors of investing who tell you to focus on stocks in the dow jones industrial average because it is filled with allegedly blue chip names. that didn't help with gm or citigroup, right, when they were annihilated during the financial crisis. there is a place for the dow stocks, many high yielders. in my opinion there is a place for speculation, for index funds which are another thing the gray beards tell you to do. i'm not against them. i know you're going to do it. let's do it right. these so-called experts say to stick with the index fund because professionals who give you the advice presume regular individual home gamers like you are brain dead. and that you are incapable of analyzing the prospects of companies on your own. that's what they think. they don't think you can pick

stocks. i'm not sure they think you can pick your own nose. they assume you will do less damage to wealth if you play around in big household names, stay away from speculative stocks and stocks you have never heard of. they say it's okay to own etfs as if they are not crazy sometimes. i'm a grizzled veteran. i have been at the stock game for 30, 32 years. it's bogus. these pros who dismiss speculation are ignoring the human element, the emotional component of investing. a lot of people invest poorly because they aren't engaged. they find it boring. they don't stay on top of what they own. it is true if you neglect your stocks, if you don't have the motivation to do the homework i don't want you in them either. you probably won't do well because buying stocks without homework is no better than gambling or you think, frankly, that you can roll the dice and somehow get lucky and that's not

the way to play. that's where speculation comes in. you need something speculative in your portfolio. high risk, high reward stocks are interesting and an undeniable mystique to owning something that trades in the single digits. i can't fight it. they allow you to stay engaged, make it easier to keep your head in the game. you hear speculation is the height of responsibility. i say a portfolio without it won't capture your fancy. it will have you bored with your money and anxious to surrender to people taking your fees. speculation doesn't just keep you interested. if you do it wisely with the right rules and discipline i think you can generate enormous gains. returns almost unheard of in larger, more well known and well liked companies deemed safe. some of the biggest wins in my investing career came from speculation. when done wrong it can lead to truly gut wrenching losses. i'm not saying it isn't

dangerous. uh i know you want to speculate, so speculate wisely. how do you identify the winners? two stocks trade? single digit territories. the hated stocks abandoned and left for dead by big institutional money managers and stocks of undiscovered companies. you can get an edge. it's virtually impossible to have in the stocks of household names simply because so many of the big boys won't touch anything under $5. you are benefitting from what i call classic mispricing from overly pessimistic money managers. big safe mutual funds don't want to own single digit stocks. they are afraid stocks will be questioned by clients about why they own this junk, risk money when there were safer stocks out there. the money managers fear the down side of stocks. so when the fundamentals of a company starts to turn you can buy stocks at terrific prices since so many big boys won't go near them until they climb to higher levels.

they want to sell low, buy high. i don't want you to do that. it's foolish. that happened with ford when it was pushed down to $4 and change. sal may, speculative stock of 2009. i got behind it at six and within two years it was 16. sprint was left for dead at the beginning of 2012. traded down to two bucks on the fears of bankruptcy even as the wireless business was lucrative and they were turning the corner. if you paid attention to the bonds and preferred stocks the bond buyers clearly believed it was viable and the common, if you just looked at preferred you may have known to go in the common with doubled from the lows after spiking on a much better than expected quarter. these stocks are supposed to be trash. they were dumpster juice. if you went dumpster diving you caught doubles or triples. deals like these don't come around every day. often we speculate in stocks people have never heard of. we are looking for sectors that seem they can capture the

imagination of the crowd. the next hot fad that will sweep through. sometimes but not always the fad will be backed up by earnings power which we saw with the little companies that make smart phone components in 2009, 2010. sky works solution to name some of the big winners. they usually have the lifecycle of a may fly. the trick is to lock in profits when you have them so you don't get burned. cut your losses before they become too large on a spec you thought would work out isn't panning out. you are not trying to find a buy and hold. not when you speculate. we want something that shoots higher. if you ring the register it doesn't matter if the stock comes down later. don't take it as a license to own a stock with bad fundamentals. that's the essence of stupid speculation. bottom line. you need to own something speculative as a key part of the diversification. something to help you rack up

huge gains, capture your fancy. lots of fantastic stocks start as speculations. just because the stock trades at three doesn't make it a three card monty. it could be a triple waiting to happen. stick with cramer. we're sitting on a bunch of shale gas. there's natural gas under my town. it's a game changer. ♪ it means cleaner, cheaper american-made energy. but we've got to be careful how we get it. design the wells to be safe. thousands of jobs. use the most advanced technology to protect our water. billions in the economy. at chevron, if we can't do it right, we won't do it at all.

we've got to think long term. we've got to think long term. ♪ we've got to think long term. we've got to think long term. on every one of our carda reminder...ate. that before this date, we have to exceed expectations. we have to find new ways to help make life easier, more convenient and more rewarding. it's the reason why we don't have costumers.

we have members. american express. welcome in.

all night i have been preaching and teaching, trying to show you how to build a portfolio of stocks to work in every market from a nasty picnic from marauding bears to euphoric pamplona-style running of the bulls you will own something right for the moment by following the new diversification like the old school diversification bisector i pushed endlessly this ensures

stocks don't all key off the bad uh news and be beaten to bits. the new diversification by strategy, not sector means whatever the market is doing you will always have one approach to investing that's paying off big time. remember what we have gone over so far in case you missed it. you need a dividend paying stock with a high yield. a growth stock and something speculative. what else? when i came up with the new idea of new diversification i said you should have foreign exposure to portfolio. given how the mess in europe crushes all things international and hammered other stuff, too, we need to refine the idea a little bit. what you need is a stock that's in a safe geography. at times when the united states is growing more slowly than the world you need something international and not something that does business over seas but a company based in a foreign country. when the rest of the world is falling apart and the u.s. looks pretty darn good by comparison, you need a stock that gives you

domestic security. something that's entirely confined within our borders. because at those moments being exposed to the world is dangerous. what do i mean by domestic security? anything that's usa all the way. you can own a phone company like at&t or verizon. how about electrical utility like duke or coned. pick a restaurant chain like dunkin or a collar store like dollar general. how about a real estate investment trust like tanger family outlet. you have seen them on over and over. why? they're winners. or own a real estate investment trust that gives you exposure to the group. in times of turmoil the slot in your portfolio should be filled by something domestic. in times of domestic turmoil where the world is in better shape which is where we were after the financial crisis then maybe you want to own a foreign company. the bottom line, always own a

stock from a safe geography. sometimes that means a foreign company. you have to always pay attention to the facts. it means domestic security that's american. believe me, you will want to go domestic for the foreseeable future. "mad money" is back after the break. [ male announcer ] drive a car filled with

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all night i have been talking to uh you about the new diversification, a way to diversify by strategy, not just sector. we still believe in the old kind of diversification by group but we have a new prism going here. you need a high yielder in the portfolio, a big dividend paying stock for downside protection and the massive gains from reinvesting dividends. you must reinvest. second you need a way to profit a lot when the market is in good shape. sometimes it is. still keep delivering gains if things get worse which is why you wrus have exposure to growth. particularly when the earnings have powerful momentum.

then you need a speculative stock that trades for less than $10. either a company left for dead by big money managers on wall street or one you have never heard of. it keeps you engaged, keeps you doing homework, keeps you from not opening the statement. i hate it when people put a statement in the drawer. fourth, something from a safe geography. either a foreign company or a domestic security play if the rest of the world is stinking up the joint. last but absolutely not least, you need some gold. gold has a special property. one that makes this metal precious to any diversified portfolio. gold goes up when everything else goes down. consider it your insurance. consider it insurance against uncertainty and inflation, things that cause most stocks to decline but cause the price of gold to rise. i like to think of the gold position as a stock insurance. would you own a home without homeowners insurance? buy a car without car insurance

first? don't invest without gold exposure because gold pays off when everything else fails. it's the best performing asset year after year for a decade racking up gains where every other class disappointed. owning gold isn't about the upside. it's about minimizing risk to the down side. at any given moment there will be a host of sectors poised to outperform gold but none works like the insurance policy of gold, even in currency. it's insurance against currency. how do you own gold? the easiest way is through the spder gold shares. you probably have heard of gld. right? it owns the metal and does a terrific job of tracking the price. you can potentially buy bullion, the physical bars of gold as opposed to the cubes i like in my soup. that only makes sense for investors with a lot of money who can pay to store it in a bank. i have to tell you, i like it.

you can do it. what about gold miners? if you pick a company with low cost it can outperform the commodity for a time. remember it won't trade in lockstep with the commodity. the same thing that makes gold valuable is the scarcity. it's hard goat ouft ground cheaply and there aren't a lot of new mines. plus gold miner have debt, finding costs, management teams that can make mistakes. a lot of geographies have gold they are afraid to go to. they have shut downs at the mines, higher than expected cash costs. expropriation. every time something goes wrong the stocks are hammered so i decided to stick with the gld or the physical commodity. bottom line. if you want exposure to gold and you need it it's your portfolio insurance policy. everybody should have some. then you can do the easy thing and own gold through the gld,

not a gold miner who's only loosely connected to the price of the underlying commodity. that's safe. this is gld. stay with cramer. this country was built by working people. the economy needs manufacturing. machines, tools, people making stuff. companies have to invest in making things. infrastructure, construction, production. we need it now more than ever. chevron's putting more than $8 billion dollars back in the u.s. economy this year. in pipes, cement, steel, jobs, energy. we need to get the wheels turning. i'm proud of that. making real things... for real. ...that make a real difference. ♪ you won't just find us online, you'll also find us in person, with dedicated support teams

at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade.

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