Jim Cramer’s Love/Hate Relationship With Index Funds
May 6th, 2009 by Nut
Jim Cramer: some people love him and some people hate him. He’s a polarizing guy because he’s an entertainer that also claims to be out there trying to help people make money and become better investors.
If you watch his show, Mad Money, then you know his entertainer side: loud and obnoxious—with a lot of sound effects. On the other hand, his helpful, sensible-advice side comes across in his books, where he says stuff like this:
Most people actually won’t get rich by buying individual stocks, Cramer says. Unless you do your homework, namely spending an hour a week researching for each stock you own, “You won’t beat the market, and you’ll probably lose money,” he writes.
For Cramerites willing to do the research, the book helps construct a long-term, diversified portfolio. For most people, however, he advises low-fee stock index funds.
That’s from this MSN Article—sounds like pretty good advice, doesn’t it? Those were my italics, by the way.
But then you have to reconcile that with his TV persona, which recently got him on the news again with this number where he freaks out over how terrible index funds are:
Never mind that 10 years isn’t long term enough, in my mind. Never mind that he picked the peak of the market and then the bottom to show how the S&P 500 has done “nothing.” Oh and how did your stock picks do over that time, Jim?
His defense?
“I am trying to entertain,” Cramer says. “I admit that.” But, he adds, he’s also trying to help people.
The lesson here? Why waste your time listening to an entertainer’s advice on money and investing? If you really do like Cramer, then by all means watch his show. Just don’t follow his advice. Pick up his books instead and let wise Cramer be your guide.
[...] Jean Chatzky—both of whom have some serious inconsistencies. Suze Orman especially—she’s more of an entertainer than a personal-finance [...]
But is 10 years too short for a 50 year old? A 60 year old? I get his point – over 10 years, you might as well have had your cash in a CD. Everyone’s eager to drink the koolaid when it comes to index funds, but the simple fact is that they haven’t been a good investment since BEFORE the dot-com boom. That’s a long time. A serious investor, picking individual stocks, would have done better. He may not be that investor, of course, but index funds aren’t the miracle retirement drug that everyone hopes they are, either. Just my 2 cents…
Steve,
That’s nonsense. This is the 2nd time I’ve seen you been wrong in two days. Not a good track record.
Well, ideally a 50 year old that owns index funds isn’t going to have more than half of his portfolio in said index fund. Unless it’s a bond fund. I don’t think too many people could endure the emotional/intellectual rigor of picking their stocks over a 10-year period of time. Is this where we talk about target retirement funds?