Investment guru Jim Cramer warns scared investors not to panic and dump all their shares during any stock-market selloff.

Wall Street sank on Tuesday as disappointing forecasts from industrial bellwethers Caterpillar and 3M triggered alarm bells over corporate growth and added to concerns ranging from China’s slowdown to Saudi Arabia’s diplomatic isolation.

The Dow Jones Industrial Average fell to its lowest since July, while the S&P 500 and the Nasdaq retreated to levels last seen in May, continuing a punishing month for U.S. stocks. The Dow dropped as many as 500 points before midday. 

However, the CNBC host said it's a big mistake to dump any stocks you own when the market is only down a couple percentage points.

"The panic is so ripe that it is no longer a strategy," Cramer said Tuesday on CNBC. "I'm offering right now a 'cool yourself' [strategy.] ... I don't want to be a seller down 2 percent," he said.

"If you sell down 2 percent, you better have a darn good reason," said Cramer, host of "Mad Money."

Cramer has said that selloffs that occur during earnings season often provide great opportunities for investors to build positions in top-notch stocks. Cramer said he would only sell if it appeared the market was going to down roughly 3 or 4 percent, CNBC.com explained.

Along with worries over profit growth, concerns over events such as the upcoming U.S midterm elections and Italy’s budget have also sent investors scrambling out of stocks.

“We are in a risk-off environment right now. Markets are worried about politics and earnings,” Sam Stovall, chief investment strategist at CFRA Research in New York, told Reuters.

“Results from Caterpillar and 3M are an additional concern that the trade tensions are indeed pressuring corporate earnings and we possibly have been seeing a peak in earnings growth.”

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