The 10-year Treasury yield reached 3 percent Tuesday morning for the first time in five years, causing all major indices to plunge. But CNBC's Jim Cramer said there's no reason to start selling.

"You now have lots of investors and commentators acting like this is indeed the end of the world, or, at the very least, I should say, the end of the bull," the host of "Mad Money" said on Wednesday.

But, he said, "I think their fear is misplaced."

In fact, Cramer said the 3 percent mark is more of a psychological barrier for investors.



"People are really freaking out," he said.

"Investors have gotten so used to lower rates," Cramer said, calling the increase "entirely predictable."

Still, market watchers panicked on Tuesday, sending the Dow Jones industrial average plunging, ultimately closing about 425 points lower.



But Cramer pointed out that 3 percent is still "insanely low." Not to mention the fact that the rate has crossed over the 3-percent mark before. Twice in 2013, the yield on the 10-year Treasury reached 3 percent, hoovered there without crossing over and quickly fell back under that level.

Furthermore, Cramer said research suggests that moving through this level does not adversely affect equities' performance.

The market often rallies, he said, with rising rates. Other times, the rate peaks past 3 percent or 4 percent — once during the 2009 financial crisis and once in 2010 during the recovery — the market "exploded," said Cramer, with all three major indices rising more than 30 percent.

Cramer pointed out that history is full of these examples, because rising interest rates means the economy is doing well. A rate hike is The Fed's attempt to cool the economy.

While rates are rising, Cramer recommends putting money into financial stocks like J.P. Morgan, large-cap technology companies such as Amazon and Facebook, and industrial companies like Boeing.



"This market has plenty of other problems," Cramer said.

"But the 10-year [Treasury] by itself is not enough to slay the bull. It just means you need to be more selective," he said.