Cramer and the Mainstream Media
Has it really come to this? Jim Cramer goes on the Today show the other day and says the following:
“Whatever money you may need for the next five years, please take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market right now.”
And what happens? The whole world goes crazy. The media is shocked that Cramer, a guy they know as wildly optimistic of any and all stocks, is “bearish” on this market.
First off, let’s get this out of the way: this is standard financial advice when it comes to the stock market. You never put money in there you are going to need in five years. But in today’s sound-bite world where everyone wants “a story” to report on (especially on the market), this has turned into the biggest non-story of the year. I heard a local newscaster this morning saying something like this:
For a guy like me, who is younger and has more time to ride out the ups and downs, I’m not affected as much. I have the ability to risk more in my portfolio.
He was trying to say this: I disagree with Cramer on this one. But unless he’s really irresponsible, he really doesn’t. Everyone is forgetting the second part of what Cramer said: “the next five years.”
When I started investing in the stock market, I decided to put my money into index funds to just get a sense of the market and get used to following it. Then, slowly, it hit me: I was going to be buying an engagement ring soon—and I was fully expecting to spend the money I had sitting in those index funds. The realization hit me with a panic and I immediately sold off all the stock and dropped it into my ING account. I’m pretty sure I made a few dollars or just about broke even, and I considered myself lucky.
The stock market is no place to put money you need for a specific, upcoming expense. Especially if it’s within the next five years.
It’s sad, really, that the media has turned this into a story that has gotten the attention of a lot of people that were already nervous about their money. Hopefully they listened to the second part of what Cramer said and, if they really need that money within five years, they shouldn’t have had in stocks in the first place. So if those people have sold off (at a huge loss, I’m guessing), then that’s a good thing. Hopefully they’ve learned their lesson.
This just goes to show you that you should really do your own research when it comes to the things that can impact your life. If some talking head says something on TV, go online and read a little bit about it before you take action. Learn for yourself, not from a 30-second sound bite.