CNBC’s Jim Cramer said he knows his rules can sometimes be contradictory — have faith in companies, but also prepare to change your mind on a dime. Be cautious but be ready to pounce if a good opportunity presents itself.

“Believe me, I get it. If you take all my rules literally, you’re going to be running around in circles while tearing your own hair out,” Cramer said. “How do you think I went bald?”

To Cramer, what you need most if you decide to pick your own stocks is good judgment, which he said is something that can take a lot of time and research to develop.

One of the first things investors can do to develop good judgment is making sure they know themselves and their objectives, he said. For example, do you want to make money to purchase a home? Are you trying to save for retirement? Or do you have some money to burn and are willing to take more risks?

There’s not always a one-size-fits-all approach to these questions, Cramer said, but going into investing with the amorphous aim of making money is not the best approach.

“Without a clearly defined goal, you have no way to determine which stocks you should be buying,” Cramer said. “In other words, your 401(k) or IRA or brokerage account do not exist in a vacuum.”

Investors who might not have the time to conduct serious research may be better off putting their funds in a basic low-cost 500 index fund, Cramer said. But those looking to make money slowly over decades might want to look into individual stocks with large and consistent dividends, he added.

“Trust me, I get it. When you get excited about a particular stock, you often want to just dive right in. First, though, you need to consider what you’re trying to get out of the market, you need to know yourself,” Cramer said. “The answer to that question is not going to be the same for everyone, but everything else stems from it. You can’t make judgments about stocks until you know what characteristics you actually are seeking and you value.”

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You need good judgment if you pick your own stocks, says Jim Cramer

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