Wednesday, January 31, 2007

Do Not Take Jim Cramer Seriously

"When you own a diversified portfolio of stocks, it is rarely the stock selections that make you money but the performance of the stock market overall—which, thankfully, usually goes up. What a truly talented stock-picker will do is select stocks that beat the market, after costs, without exposing you to more risk than the market. Because the vast majority of stock-pickers can't do this, you are almost always better off in a diversified portfolio of low-cost index funds. Properly constructed, such a portfolio will, over decades, make you more money, with less risk, than even an above-average stock-picker (let alone a chair-throwing, self-aggrandizing clown)."

From "Pay No Attention to That Crazy Man on TV," from
Slate.com.

My advice: Watch Jim Kramer for entertainment purposes only, and buy and hold the Fidelity S&P 500 Index Fund as a major part of your investment portfolio - the expense ratio on that fund is only 1/10 of 1% ($100 annually on a $100,000 investment - you can't invest more cost effectively on your own, and no broker will manage your investments for 1/10 of 1%) and you'll beat 97% of actively managed mutual funds in the long run, after expenses and taxes.

3 Comments:

At 1/31/2007 1:23 PM, Anonymous Anonymous said...

Thats solid advice. I think so many people fail to see the benfits of having a diversified portfolio of ETF's. I recently spoke to a finance major at UM-F whom reccomended I buy some no load mutual funds from Merrill Lynch. Their reason why I could get high returns and personal service. Well I put a hypotheitcal $5000 in thier reccomendations and last year only made around 4.4% after fees. My simple investment pf 25% invested in 4 vanguard funds (Vanguard Inflation-Protected Securities, Emerging Markets, 500 Index and Long-Term U.S. Treasury) made around 9.4 after fees. The lesson! If you dont know how to invest just buy CD's as currently they can yeild more than a managed ML portfolio.

 
At 1/31/2007 1:24 PM, Anonymous Anonymous said...

Thats solid advice. I think so many people fail to see the benfits of having a diversified portfolio of ETF's. I recently spoke to a finance major at UM-F whom reccomended I buy some no load mutual funds from Merrill Lynch. Their reason why I could get high returns and personal service. Well I put a hypotheitcal $5000 in thier reccomendations and last year only made around 4.4% after fees. My simple investment pf 25% invested in 4 vanguard funds (Vanguard Inflation-Protected Securities, Emerging Markets, 500 Index and Long-Term U.S. Treasury) made around 9.4 after fees. The lesson! If you dont know how to invest just buy CD's as currently they can yeild more than a managed ML portfolio.

 
At 5/09/2007 11:30 PM, Blogger stockTagger said...

Yeah, but Jim Cramer can predict buyouts quite well. wink,wink http://www.stocktagger.com/2007/05/jim-cramer-takeover-targets-performance.html

 

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