Cramer says not to invest in Index Funds :)

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quanuec
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Cramer says not to invest in Index Funds :)

Post by quanuec »

"Cramer reminded that the whole premise of Mad Money is predicated on his belief that you can do better than many pros by actively managing your portfolio."

http://www.cnbc.com/id/49918951

I fear how many will literally get burned following this! Advocating average joes to actively manage their money is no better than encouraging people to use medicines without prescriptions!
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Rob5TCP
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Re: Cramer says not to invest in Index Funds :)

Post by Rob5TCP »

quanuec wrote:I fear how many will literally get burned following this! Advocating average joes to actively manage their money is no better than encouraging people to use medicines without prescriptions!
But it does make for dramatic television viewing. Have to do something to keep those ratings up. Can't just keep saying buy index funds.
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Boglenaut
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Re: Cramer says not to invest in Index Funds :)

Post by Boglenaut »

Rob5TCP wrote:can't just keep saying buy index funds.
Why not? This site does and it does pretty well. ;)
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momar
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Re: Cramer says not to invest in Index Funds :)

Post by momar »

"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
bayview
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Re: Cramer says not to invest in Index Funds :)

Post by bayview »

Well, if Cramer says to avoid index funds, then I know I'm doing right.
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TomatoTomahto
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Re: Cramer says not to invest in Index Funds :)

Post by TomatoTomahto »

That is as newsworthy as my barber telling me I need a haircut.
I get the FI part but not the RE part of FIRE.
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Re: Cramer says not to invest in Index Funds :)

Post by Grt2bOutdoors »

I ran into him on the street once, he never said "not to invest in index funds", he said to "buy this, sell that". :D I'd like to see his commission bill at the end of each month.
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NightOwl
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Re: Cramer says not to invest in Index Funds :)

Post by NightOwl »

I'm not a huge Cramer fan, but what he says in this article isn't as bad as I had expected.

He starts by saying:
"As much as I like the tax-favored status of 401(k) plans, I need to tell you something heretical, something almost nobody else will come out and say: Most company 401(k) plans stink," he said.
"They have high management fees and administrative costs that eat into your returns, and worst of all, they typically offer you lousy choices for your investments and not nearly enough control over them," Cramer added. "The 401(k) business is a racket for the managers who get to charge you these fees.
I'd say "many" instead of "most," but I largely agree with him about much of the 401k industry. It's within this context that he recommends getting away from high 401k fees by investing only up to the match in a bad 401k and then maxing out an IRA. He doesn't say what to do after that, but I suspect that for much of his audience, that's enough annual investing space.

At least in this article, Cramer never says not to invest in index funds -- in fact, he seems to imply that index funds might be the best thing one could hope for in a bad 401k:
And typically a 401(k) plan doesn't allow for that. "They only let you choose from mutual funds, bond funds and perhaps index funds."
Never mind that index funds ARE mutual funds, I think he's trying to say that you're lucky to get index funds, and that compared to high-fee active funds, one might be better off investing in an IRA once one is past the company 401k match -- we have that discussion here all the time.
Cramer reminded that the whole premise of Mad Money is predicated on his belief that you can do better than many pros by actively managing your portfolio.
I actually agree with this statement, with the caveat that what I mean by "actively managing" is determining my own risk tolerance, creating my own asset allocation, and buying my own index funds. But I think that many people can outperform "many pros" by executing a wide variety of strategies that aren't weighted down by 2%+ in annual management fees/ERs.

Look, Cramer is always going to hawk individual stocks, and I think it's crazy to think that one can create a diversified portfolio of 5-10 individual holdings, but at least in this article the alternative is a bunch of bad, high-fee, actively managed mutual funds, not a portfolio of low-fee index funds.

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nedsaid
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Re: Cramer says not to invest in Index Funds :)

Post by nedsaid »

BUY!!!!!

SELL!!!!

BUY!!!!

I like Cramer but he is a bit manic depressive. It is amazing how often he changes his opinions. One day he is down on a particular stock and a few days later he is recommending it!! Bearish on the market one day, a week later bullish. Too much of a day trader's mentality for me.

Index funds are too boring for a guy whose idea of long term is about 20 minutes.

SELL!!! Wait a minute! BUY!!!
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Re: Cramer says not to invest in Index Funds :)

Post by Sriracha »

According to the article, "If you have the wherewithal Jim Cramer thinks the best way to maximize your investments is with a diversified portfolio of 5 to 10 individual stocks."

Wow, that would be some trick ... a diversified portfolio of 5 stocks :shock:
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Re: Cramer says not to invest in Index Funds :)

Post by Diogenes »

Cramer is just entertainment, not real financial advice.

_D_
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tiberius72
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Re: Cramer says not to invest in Index Funds :)

Post by tiberius72 »

NightOwl wrote:I'm not a huge Cramer fan, but what he says in this article isn't as bad as I had expected.

He starts by saying:
"As much as I like the tax-favored status of 401(k) plans, I need to tell you something heretical, something almost nobody else will come out and say: Most company 401(k) plans stink," he said.
"They have high management fees and administrative costs that eat into your returns, and worst of all, they typically offer you lousy choices for your investments and not nearly enough control over them," Cramer added. "The 401(k) business is a racket for the managers who get to charge you these fees.
I'd say "many" instead of "most," but I largely agree with him about much of the 401k industry. It's within this context that he recommends getting away from high 401k fees by investing only up to the match in a bad 401k and then maxing out an IRA. He doesn't say what to do after that, but I suspect that for much of his audience, that's enough annual investing space.

At least in this article, Cramer never says not to invest in index funds -- in fact, he seems to imply that index funds might be the best thing one could hope for in a bad 401k:
And typically a 401(k) plan doesn't allow for that. "They only let you choose from mutual funds, bond funds and perhaps index funds."
Never mind that index funds ARE mutual funds, I think he's trying to say that you're lucky to get index funds, and that compared to high-fee active funds, one might be better off investing in an IRA once one is past the company 401k match -- we have that discussion here all the time.
Cramer reminded that the whole premise of Mad Money is predicated on his belief that you can do better than many pros by actively managing your portfolio.
I actually agree with this statement, with the caveat that what I mean by "actively managing" is determining my own risk tolerance, creating my own asset allocation, and buying my own index funds. But I think that many people can outperform "many pros" by executing a wide variety of strategies that aren't weighted down by 2%+ in annual management fees/ERs.

Look, Cramer is always going to hawk individual stocks, and I think it's crazy to think that one can create a diversified portfolio of 5-10 individual holdings, but at least in this article the alternative is a bunch of bad, high-fee, actively managed mutual funds, not a portfolio of low-fee index funds.

NightOwl
I am a complete newbie to this investing

I usually watch Cramer when I am traveling for business and when the market does something weird. Nice entertainment...as the usual stuff is junk. I decided to track many of the stocks he has suggested for the last few yrs. Most of what he says is only works if you are constantly doing your "homework" as he says. It can become too much after a while.

I am intrigued by this whole don't put in more than your company match. Any pointers to where this might be discussed in the forums ? I currently put double what my match (6%) is and contribute the max ($k) T-IRA. Is there something I am doing wrong ?
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Re: Cramer says not to invest in Index Funds :)

Post by Tortoise »

tiberius72 wrote:I am a complete newbie to this investing

I usually watch Cramer when I am traveling for business and when the market does something weird. Nice entertainment...as the usual stuff is junk. I decided to track many of the stocks he has suggested for the last few yrs. Most of what he says is only works if you are constantly doing your "homework" as he says. It can become too much after a while.

I am intrigued by this whole don't put in more than your company match. Any pointers to where this might be discussed in the forums ? I currently put double what my match (6%) is and contribute the max ($k) T-IRA. Is there something I am doing wrong ?
Not necessarily. The reason for contributing only to the match is if your 401(k) does not offer low-fee index funds. If your 401(k)'s index fund choices are poor (i.e, expensive) or non-existent (i.e., only actively managed funds available), then contribute up to your employer's match to get that free money, and then contribute to a Roth IRA, assuming you make under the income limits for contributing to a Roth. You can still probably do a backdoor Roth even if you are over the income limit for a direct Roth contribution.

Wiki pages:
I have a bad 401(k); should I invest in it or in a taxable account?
Should I invest in a Roth or traditional IRA or 401(k)?
Backdoor Roth
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inbox788
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Re: Cramer says not to invest in Index Funds :)

Post by inbox788 »

NightOwl wrote:I'm not a huge Cramer fan, but what he says in this article isn't as bad as I had expected.

He starts by saying:
"As much as I like the tax-favored status of 401(k) plans, I need to tell you something heretical, something almost nobody else will come out and say: Most company 401(k) plans stink," he said.
"They have high management fees and administrative costs that eat into your returns, and worst of all, they typically offer you lousy choices for your investments and not nearly enough control over them," Cramer added. "The 401(k) business is a racket for the managers who get to charge you these fees.
I'd say "many" instead of "most," but I largely agree with him about much of the 401k industry. It's within this context that he recommends getting away from high 401k fees by investing only up to the match in a bad 401k and then maxing out an IRA. He doesn't say what to do after that, but I suspect that for much of his audience, that's enough annual investing space.

At least in this article, Cramer never says not to invest in index funds -- in fact, he seems to imply that index funds might be the best thing one could hope for in a bad 401k:
And typically a 401(k) plan doesn't allow for that. "They only let you choose from mutual funds, bond funds and perhaps index funds."
Never mind that index funds ARE mutual funds, I think he's trying to say that you're lucky to get index funds, and that compared to high-fee active funds, one might be better off investing in an IRA once one is past the company 401k match -- we have that discussion here all the time.
Cramer reminded that the whole premise of Mad Money is predicated on his belief that you can do better than many pros by actively managing your portfolio.
I actually agree with this statement, with the caveat that what I mean by "actively managing" is determining my own risk tolerance, creating my own asset allocation, and buying my own index funds. But I think that many people can outperform "many pros" by executing a wide variety of strategies that aren't weighted down by 2%+ in annual management fees/ERs.

Look, Cramer is always going to hawk individual stocks, and I think it's crazy to think that one can create a diversified portfolio of 5-10 individual holdings, but at least in this article the alternative is a bunch of bad, high-fee, actively managed mutual funds, not a portfolio of low-fee index funds.

NightOwl
I'm not a fan, but I thought I heard him say "Find a decent low cost index fund. Put your 401k money in there." Once in a while, if you are selective and critical of what he says, sometimes he makes sense. He says so much that he's got to be right some of the time.

Diversification is a two edge sword. It's bound to get to to average, but if the goal is to beat average, you cannot diversify. Not sure what is harder, picking a winning stock or picking a few that are going to beat average. Pick too many and you'll pretty much be average. Coke vs pepsi? ATT vs Verizon? GM vs Ford? Pick them all and you have a diversified fund. Pick 3 winners and you beat the average. Now if you can pick the 3 winners, are you good or are you lucky?
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Re: Cramer says not to invest in Index Funds :)

Post by Methedras »

Index funds are too boring for a guy whose idea of long term is about 20 minutes.
I'd be willing to bet he doesn't practice what he preaches. Cramer didn't get a "hit" show because he provides rational, sensible advice. It is of course the manic nature of the show that attracts people to it. In Cramer's own accounts, I have serious doubts that he is buying and selling so frequently. I can't know for sure, but I would find it funny if here were actually a "closet" index investor.
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Re: Cramer says not to invest in Index Funds :)

Post by YttriumNitrate »

deleted.
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Re: Cramer says not to invest in Index Funds :)

Post by ruralavalon »

Nice :D .

Thanks for the link.
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Rob5TCP
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Re: Cramer says not to invest in Index Funds :)

Post by Rob5TCP »

Boglenaut wrote:
Rob5TCP wrote:can't just keep saying buy index funds.
Why not? This site does and it does pretty well. ;)

Yes, but this site is to educate, not to entertain (though some of the posts are quite entertaining).
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Re: Cramer says not to invest in Index Funds :)

Post by Rick Ferri »

In the article the author wrote:Cramer reminded that the whole premise of Mad Money is predicated on his belief that you can do better than many pros by actively managing your portfolio.
I agree. You CAN do better than most pros be actively deciding to manager your portfolio in index funds.

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Re: Cramer says not to invest in Index Funds :)

Post by azanon »

Diogenes wrote:Cramer is just entertainment, not real financial advice.

_D_
Exactly. I'd be surprised if he ever endorsed index funds as doing so wouldn't be exactly a healthy thing to do to increase his viewership/readership.

I admit to watching the show occasionally and being entertained simply because I enjoy finances. But at the end of the day, my money is in Vanguard index funds and stays there.
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Re: Cramer says not to invest in Index Funds :)

Post by neurosphere »

tiberius72 wrote: I am intrigued by this whole don't put in more than your company match. Any pointers to where this might be discussed in the forums ? I currently put double what my match (6%) is and contribute the max ($k) T-IRA. Is there something I am doing wrong ?
Yes, listening to Cramer. :D

Rule #1: Take the maximum match for sure in your 401k
Rule #2: Start a new post and ask your questions about how you should be directing your retirement savings. :)

Some brief points for now.

-- If your 401k is TRULY horrible with very expensive investments, you will certainly want to consider investing in a Roth IRA instead. Let us know the expense ratios and other details of your 401k options, and we can let you know if you have good option, bad options, or horrible options.
-- In general, you want to take advantage and 'fill-up' if you can, any tax-favored accounts available to you (401k, Roth, etc).
-- Did I understand you correctly when you say you are contributing to your 401k and a traditional IRA? Be careful, because there are income limitations which may affect your ability to make deductible IRA contributions if you have a 401k.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
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Re: Cramer says not to invest in Index Funds :)

Post by InvestorNewb »

... Jim Cramer had a 46.8 percent accuracy rating based on 62 market predictions.
Source: http://www.rickferri.com/blog/markets/i ... t-markets/

In other words, a coin flip has better accuracy than this guy.
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Re: Cramer says not to invest in Index Funds :)

Post by sschullo »

Diogenes wrote:Cramer is just entertainment, not real financial advice.

_D_
+1
I love Cramer's buttons! Always have, especially ones I can push at science displays at museums.
Cheap entertainment is important too!
Last edited by sschullo on Thu Jul 11, 2013 10:51 am, edited 2 times in total.
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Re: Cramer says not to invest in Index Funds :)

Post by G-Money »

quanuec wrote:I fear how many will literally get burned following this!
Doubtful any will literally get burned. Perhaps figuratively.
Don't assume I know what I'm talking about.
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Re: Cramer says not to invest in Index Funds :)

Post by dhodson »

i thought his show last night was positive about investing in index funds. i only saw a few minutes but i thought it recommended them.
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Re: Cramer says not to invest in Index Funds :)

Post by TSR »

G-Money wrote:
quanuec wrote:I fear how many will literally get burned following this!
Doubtful any will literally get burned. Perhaps figuratively.
I scrolled down just for this.
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Phineas J. Whoopee
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Re: Cramer says not to invest in Index Funds :)

Post by Phineas J. Whoopee »

inbox788 wrote:...
Diversification is a two edge sword. It's bound to get to to average, but if the goal is to beat average, you cannot diversify. ...
Therein lies the rub.

One potential goal may be to beat average, but my goal is to adequately provide for my future financial needs. I don't have to compare my overall portfolio's performance to any thing or any one.

PJW
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Re: Cramer says not to invest in Index Funds :)

Post by jwa »

Jon Stewart
inbox788
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Re: Cramer says not to invest in Index Funds :)

Post by inbox788 »

InvestorNewb wrote:
... Jim Cramer had a 46.8 percent accuracy rating based on 62 market predictions.
Source: http://www.rickferri.com/blog/markets/i ... t-markets/

In other words, a coin flip has better accuracy than this guy.
That's excellent! Going AGAINST Cramer, you have a 53.2% advantage!

Another way to profit listening to Cramer is to take advantage of the Cramer Effect or Cramer Bounce http://www.investopedia.com/terms/c/cramerbounce.asp.

http://www.ehow.com/how_2249875_jim-cra ... -cash.html
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Re: Cramer says not to invest in Index Funds :)

Post by ProfessorX »

Listening to Cramer is a bad idea.
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Re: Cramer says not to invest in Index Funds :)

Post by stemikger »

Cramer is wrong more than he is right. Also, he used to have a radio show way before he had a television show and he would always recommend people invest in the S&P Index Fund. I would not listen to a word he says.
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Re: Cramer says not to invest in Index Funds :)

Post by inbox788 »

stemikger wrote:Cramer is wrong more than he is right. Also, he used to have a radio show way before he had a television show and he would always recommend people invest in the S&P Index Fund. I would not listen to a word he says.
Given his track record, you should bet against him! Listen to every word he says, and do the opposite!
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Re: Cramer says not to invest in Index Funds :)

Post by ScrewsLoose »

It is called "Mad Money", it is very insightful.

Someone else state "Cramer is wrong more than right". Cramer is very good at doing his job and helping others.

quanuec wrote:"Cramer reminded that the whole premise of Mad Money is predicated on his belief that you can do better than many pros by actively managing your portfolio."

http://www.cnbc.com/id/49918951

I fear how many will literally get burned following this! Advocating average joes to actively manage their money is no better than encouraging people to use medicines without prescriptions!
"Mad Money"doesn't this mean extra money that you can throw away, it used to and still does that I know of.
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Epsilon Delta
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Re: Cramer says not to invest in Index Funds :)

Post by Epsilon Delta »

ScrewsLoose wrote:"Mad Money"doesn't this mean extra money that you can throw away, it used to and still does
that I know of.
That's almost the opposite of the definition I learned.
Merriam Webster wrote:Definition of MAD MONEY
: money that a woman carries to pay her fare home in case a date ends in a quarrel; also : money set aside for an emergency or personal use
Nathan Drake
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Re: Cramer says not to invest in Index Funds :)

Post by Nathan Drake »

Cramer isn't stupid -- he knows index funds are the superior choice for the prudent investor that regularly buys stocks, holds them for the long-term, and re-balances periodically.

His audience, and thus advice, is tailored to a completely different demographic than the one on this forum. These are people that want to "get rich quick". These are not people that are excited by 5-7% real returns in any given year (even though, compounded, this amounts to a massive amount of wealth creation over the long-term).

So, I wouldn't be so down on Cramer. I've seen him in interviews with Jack Bogle before and he actually completely agrees with his advice. His comments on 401K plans is certainly right on the money.
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Re: Cramer says not to invest in Index Funds :)

Post by zotty »

We are missing the elephant in the room. Cramer's ratings are at historic lows. I wonder how many of the callers are actually shills, not real callers.

The schtick is winding down. It'll be over before too long. Think about it, Stocks at historic highs, ratings at historic lows. It doesn't make sense. We the people deserve some credit for turning that "entertainment" off.

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Kalo
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Re: Cramer says not to invest in Index Funds :)

Post by Kalo »

In addition to the other reasons for not taking his advice, I honestly can hardly figure out what he's recommending most of the time. He talks so fast and enunciates so poorly, that I can't figure out what he's saying. It's similar to other CNBC shows, but worse because he talks so fast and frenetically.

I also find it pretty indicting that these types of shows never post their results anywhere. Probably they don't even calculate them.

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Re: Cramer says not to invest in Index Funds :)

Post by Kalo »

That is hilarious.

:happy

Kalo
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Re: Cramer says not to invest in Index Funds :)

Post by inbox788 »

Kalo wrote:In addition to the other reasons for not taking his advice, I honestly can hardly figure out what he's recommending most of the time. He talks so fast and enunciates so poorly, that I can't figure out what he's saying. It's similar to other CNBC shows, but worse because he talks so fast and frenetically.

I also find it pretty indicting that these types of shows never post their results anywhere. Probably they don't even calculate them.

Kalo
Your comment and interpretation had me check exactly what their disclaimer is and how they avoided getting in trouble with the SEC about giving financial advice. He doesn't give advice, he provides his opinion.

Mad Money Disclaimer

All opinions expressed by Jim Cramer on this website and on the show are solely Cramer’s opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL or their parent company or affiliates, and may have been previously disseminated by Cramer on television, radio, internet or another medium. You should not treat any opinion expressed by Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Cramer’s opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Cramer, CNBC, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Cramer’s statements and opinions are subject to change without notice. No part of Cramer’s compensation from CNBC is related to the specific opinions he expresses.

Past performance is not indicative of future results. Neither Cramer nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

http://www.cnbc.com/id/100000935
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Re: Cramer says not to invest in Index Funds :)

Post by goodoboy »

quanuec wrote:"Cramer reminded that the whole premise of Mad Money is predicated on his belief that you can do better than many pros by actively managing your portfolio."

http://www.cnbc.com/id/49918951

I fear how many will literally get burned following this! Advocating average joes to actively manage their money is no better than encouraging people to use medicines without prescriptions!

Can you imagine having a your IRA filled with dividend stocks only? Nightmare and no sleep.

I wonder why he would tell someone this. This dangerous information to publicly say to the world.
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Re: Cramer says not to invest in Index Funds :)

Post by mickeyd »

I often hear us talk about indexing being a boring concept, though we all generally follow that trail ourselves. If there were a daily or weekly indexing/passive investing show on CNBC I would probably watch it, as would most Bogleheads, but we would probably be among the few and far between.

Imagine Cramer hosting such an indexing show. Can't imagine a title to get folks all interested and itchy to tune in.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
exoilman
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Re: Cramer says not to invest in Index Funds :)

Post by exoilman »

mickeyd wrote:I often hear us talk about indexing being a boring concept, though we all generally follow that trail ourselves. If there were a daily or weekly indexing/passive investing show on CNBC I would probably watch it, as would most Bogleheads, but we would probably be among the few and far between.

Imagine Cramer hosting such an indexing show. Can't imagine a title to get folks all interested and itchy to tune in.
He's a great entertainer and after that show the "mad money" will focus on ETF's as the new way to trade the market.

Sam
ScrewsLoose
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Re: Cramer says not to invest in Index Funds :)

Post by ScrewsLoose »

of course this is not Webster but this is how I have always been told "mad money" is..........just as the show is about "speculative" stocks mainly with "extra" money you can go "hog wild" with or lose and it really does not matter.

quoted of what a lawyer calls 'mad money'

"Mad money

Many people have a huge urge to treat their windfall as mad money. "Mad money" has two qualities: first it is spent fast and makes you feel like a kid in a candy store, and second, if someone quizzed you about what you spent it on a year later, you wouldn't know. We have nothing against using some portion for your windfall for mad money, but keep it to an amount you feel good about."


Epsilon Delta wrote:
ScrewsLoose wrote:"Mad Money"doesn't this mean extra money that you can throw away, it used to and still does
that I know of.
That's almost the opposite of the definition I learned.
Merriam Webster wrote:Definition of MAD MONEY
: money that a woman carries to pay her fare home in case a date ends in a quarrel; also : money set aside for an emergency or personal use
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stemikger
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Re: Cramer says not to invest in Index Funds :)

Post by stemikger »

He talks faster then a used car salesman.

Now listen to how Jack and Warren give advice.

http://www.youtube.com/watch?v=A0gQiz0pCyI

http://www.youtube.com/watch?v=yk94tI_2QOY

Could you tell the difference? LOL.
bayview wrote:Well, if Cramer says to avoid index funds, then I know I'm doing right.
+1
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
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