Below, Jim Cramer shares five key insights from his new book, How to Make Money in Any Market.
Jim is the renowned personal finance expert best known for his 20 years as the host of CNBC’s Mad Money. In his four decades working on Wall Street, he has been a broker, trader, investment advisor, hedge fund manager, entrepreneur for a digital website, and ultimately television host. He is also cohost of Squawk on the Street, founder of the CNBC Investing Club, and author of several investing books.
What’s the big idea?
How to Make Money in Any Market helps democratize the process of making a lot of money with only a little to start. Everyone deserves access to the tools needed for building wealth independently of advisors. Taking control of your own investing is not as hard as it seems, and it’s your best bet for a fair shot at riches.
1. All money advice is not equal.
Our financial system is as broken as our healthcare system. We don’t teach money. We don’t teach stocks. Most people don’t even know what a stock really is and how it is related to a company. They don’t know why it goes up. They don’t know why it goes down. They don’t know the process of making money with the money they already have. That’s unacceptable, especially as we approach a $100 trillion transfer of wealth from baby boomers to the next generation.
As a baby boomer myself, I want to help those passing down that wealth, and receiving it. Everyone needs to know not only how to accept the money graciously, but how to make it grow, matter, and last. A warning to market professionals: I reveal, smash, and trash a system that too often works against the regular investor while favoring the wealthy.
Many market professionals hold a bias toward the so-called “little guy” on Wall Street. The mom-and-pop savers are treated like they are too stupid to handle their own money. Rich people, however, are seen as brilliant and showered with support because they generate the most fees in exchange for their money. They get personal white glove treatment. They get all the advice they want about individual stocks. They are put on a pedestal while the poor average investor is denigrated. I want that hegemony to end. It’s about time that the everyday person who has bills to worry about gets access to better guidance about wealth building.
2. Save the right way.
Current wisdom says you are not smart enough to manage your own money. You either must park it in an index fund or pay a broker who will likely just put it in an index fund for you. Wealth advisors size up incoming clients, and if you aren’t wealthy enough to be “worth” the firm’s time, then you get dumped into the index fund pool. Over the years, that method has become the default mechanism embraced by Wall Street.
Their approach is brilliant and nefarious, because you will always do as well or as badly as the stock market. It’s a foolproof method: blame the stock market if it goes south, take credit if you stay in lockstep with a winning market. I rebel against that orthodoxy. I want you to do better than the market. I want you to grow rich or get richer with a personalized regimen that takes into account your predilections.
“You will never get rich exclusively owning index funds.”
I don’t entirely dismiss index funds. I tolerate them for half your savings, for the sake of diversification. But for the other half you should pursue individual stocks, which are the real path to riches. Specifically, I encourage that people pick five. You will never get rich exclusively owning index funds. You are almost never going to have enough money to retire that way, but you can get rich owning individual stocks. Balancing between index funds and individual stocks is the way to stamp a ticket that can really make a difference.
3. There’s no reason to fear the stock market.
If you have someone competent to teach you about picking stocks, you’ll find that it’s not as difficult as it seems. I can be that teacher. I taught investing at Goldman Sachs, and I have worked with literally hundreds of thousands of investors over the years—not to mention the many other accomplishments as a financial educator on my resume.
I have never seen anyone become a millionaire investing in index funds alone, but with individual stocks? Untold thousands. I will help you.
When I started on Wall Street, the Dow Jones Industrial Average stood at about 1000. Now it’s north of 40,000. It got there by meandering upward. Lots of that progress happens over a handful of days each year, while the rest of the time there is little action. Hence why making money in every market is a challenge.
“Each bear market has yielded to a bull market.”
You need to invest in quality stocks of your own choosing, not trade away your capital or cut and run. I do not advise being fearful. I do counsel patience. You must be fastidious in putting money away every month, letting that money compound via dividends and capital appreciation. My method includes taking advantage of every downturn by putting even more money into the market.
Each bear market has yielded to a bull market. These setbacks are opportunities to make your money grow even faster on the rebound. I don’t care how much or how little you put in the market each month, so long as you put something away.
4. Choose which companies are worth your hard-earned dollars.
Rely on your own power of observation to find companies you might like and then get curious enough to learn more about those companies. There are many ways to research a stock, and I have explanations that go from the balance sheet to the post earnings report conference call. With my help, you will never again invest in the un-investable. I also have advice on how to use artificial intelligence to make sure you’re not overlooking something about your stocks. I demystify the process by showing you how the best investors pick the best stocks and then stay on top of them.
I also demand that you speculate with at least one of your stocks. You never know which could be the next Nvidia or Tesla. The more youthful you are, the more willing I am to bless even more speculation. Young people should think extra big about the future because have their whole lives to make up for any losses. Your risk should be throttled back as you get older, but never entirely leave stocks out because you can’t make the money you need to retire without them.
“Growth stocks are the only true form of safety.”
The S&P 500 is basically a two-way investing game—buy or sell—nothing more than a trading vehicle. My 40 years of studying stocks prove conclusively that real success comes from owning companies with superior growth. In the old days, if you wanted safety, you turned to the staples, like food companies or consumer packaged goods, but those stocks are stagnant pools for your cash.
Growth stocks are the only true form of safety. While they may fall out of favor on Wall Street for a few weeks or even months, they never truly go out of style. Historically, major institutions always return to growth stocks, and individual investors should do the same. Yet most advisors steer clients toward stocks that mirror index funds. That’s why achieving financial freedom depends on owning five carefully selected growth stocks, complemented by the defensive diversification of an index fund.
5. Not everyone will get rich, but everyone deserves a fair shot.
I have a list of 10 sectors that I believe are filled with timeless opportunities. Through my belief in semiconductors, I found Nvidia—the greatest stock of all time—spotting it when it was trading at about a dollar. I was so confident in its prospects that I even renamed my rescue mutt “Nvidia.”
In this book, I will give you 10 stocks that I think could be the next Nvidia, along with a few dividend powerhouses for additional compounding. I understand the hesitation of owning stocks with no income as you get older, and I’m willing to guide you through it.
I also cover the Magnificent Seven: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. Which of these are still a buy? Which should be avoided? You might ask, if it is so easy, why isn’t everyone rich? That answer comes in the final chapter, where I discuss mistakes.
“In the end, it’s still your money.”
I’ve made plenty of mistakes, and I’m willing to show you what no professional ever does—the errors that held back my performance. I’m as fallible as you are, but I know how to repair an error when I see one. In the end, it’s still your money. If you’re content with average returns, just buy the average index fund, as the pros advise. But if you want to get rich, this book is designed to help you pick the stocks that can get you there. It’s time for you to be treated like those who are already rich. You deserve your shot at building and keeping wealth.
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