Investment Planner – Stock Picking
“While Cramer may be entertaining and mesmerizing to many of his viewers, his aggregate or average stock recommendations are neither extraordinarily good nor extraordinarily bad.”
Really? Says who?! Is there someone out there who considers Cramer to be a plausible investment planner? This quote appears in an article I just read, which claims to have proof that Jim Cramer, of the popular Mad Money TV show, is not a lousy stock picker. Now, this kind of thing always aggravates me. I hate stock picking. If you’ve watched any of my video blog at JohnPollock.tv, you know I consistently urge my customers to stop trying to pick stocks. So imagine my surprise to read an article that says Cramer isn’t a lousy stock picker. My attitude? Every stock picker is a lousy stock picker – it’s just the nature of stock picking.
I have to credit Jim Cramer with at least this much – he is a great showman, though I think he’s no investment planner. He can be fun to watch (at least in small doses), and I won’t rule out the possibility that people can learn interesting things about the market by watching his show. But did you know that his show is produced by the same people who produce the Jerry Springer show? Think about it.
But still, let’s be analytical about this – like an investment planner would be. If you read further into the article, you learn that two researchers from Northeastern University analyzed all of Cramer’s trade recommendations and found that Cramer’s picks would have shown a gain of 12.1% over the last few years, during a time where the Standard and Poor’s index only gained 7.4%. That’s not bad, right? But check out the fine print.
Cramer tends to pick small-cap stocks, and guess what – small-caps tend to grow quickly! That’s just how they work. Knowing that, let me tell you how you beat Cramer’s portfolio. Tell your investment planner that you want to stop picking individual stocks, and buy a broadly-based structured fund that focuses on small-cap stocks. You’ll cut out the trading costs (consider that each trade that Cramer recommends would probably cost you ten bucks in trading costs), you’ll cut out the taxes, and you’ll have better returns.
And here’s another nice benefit; you won’t have to waste an hour of your life every day watching Cramer’s show!