Mad Money w/ Jim Cramer 12/29/25

Summary

Mad Money w/ Jim Cramer – Episode Summary (12/29/25)

Overview

In this episode, Jim Cramer delivers an energetic challenge to the prevailing wisdom of index fund supremacy, advocating for a balanced approach that includes both index funds and carefully selected individual growth stocks. Drawing from personal stories, history, and listener Q&A, Cramer aims to empower regular investors with practical strategies to "make money in any market," blending old-school stock-picking wisdom with modern tools and accessibility.

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Key Discussion Points & Insights

1. Index Fund "Supremacy" vs. Stock Picking

• Cramer’s Thesis: The dominant narrative says picking individual stocks is risky and regular people can't beat the market — thus, index funds are for everyone.
• Cramer’s Response:
  • He respects index funds (“I still recommend putting 50% of your savings in index funds... but that's purely as a hedge...”.
  • He believes most of an index is “mediocre or flat out bad” stocks, weighing down returns. ([03:45])

Notable Quote

"The unvarnished truth: you will most likely NOT get rich just by owning index funds." – Jim Cramer [04:58]

2. Personal and Industry Experience

• Cramer recounts his Wall Street start at Goldman Sachs, where only the ultra-wealthy received real attention, illustrating why average investors are often pushed toward passive funds ([05:59]).
• He likens the financial advisory industry to the healthcare system: "impenetrable and it caters to the wealthy" ([07:10]).
• DIY Value: With easier access to information than ever, Cramer insists individuals can identify winners if they're willing to work for it.

3. Cramer’s Model Portfolio Structure

• Basic Framework: 50% in index funds, 50% in five individual growth stocks across different industries, plus one non-stock hedge (gold, crypto, etc.). ([07:55])
  • Index fund is the “backup” or safety net.
  • The rest? Go after outsized returns with carefully chosen growth stocks.

Notable Quote

"Walk with an index fund and chew bubble gum with individual stocks at the same time." – Jim Cramer [08:59]

4. Caller Q&A Segment

a. Portfolio Construction for Young Investors

• Jacob (NY) asks about balancing ETFs, growth stocks, and riskier trades.
• Cramer's Advice: Focus on high-growth stocks plus a reliable index fund, allow a small portion for “speculative” stocks ([09:58]).
  • “Go for gusto early and let them compound."

b. Mutual Funds & ETFs vs. Stocks

• Glenn (IL) asks why Cramer downplays funds/ETFs.
• Cramer clarifies: He holds index products, but wants them to be part (not all) of the mosaic ([10:42]).
  • “I am willing to coexist with them, but they’re not willing to coexist with me.”

c. Stop Orders vs. Limit Orders

• Kelly (FL) queries stop/limit strategy.
• Cramer: Prefers limit orders for control, warns stops can get "blown through" in fast markets ([12:48]).

d. Retirement vs. "Mad Money" Investing

• Dean (FL): Cramer endorses blending growth stocks (for mad money) and yielders for retirement, avoiding all-cash positions ([29:40]).

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5. The Search for "Hero Stocks"

• Cramer recalls his creation of FANG (Facebook, Amazon, Netflix, Google) and the subsequent “Magnificent Seven” ([15:00-17:44]).
  • These stocks, hiding "in plain sight," vastly outperformed the S&P 500.
• He discusses Hendrik Bessembinder’s paper, noting only a few stocks produce most market gains, but Cramer argues they’re not hidden if you're observant ([19:40-21:39]).
  • "The bottom line: it’s only hard to find these hero stocks if you’re picking randomly… Obvious winners tend to keep winning.”

Notable Quote

"They were companies you probably interacted with every day … hiding in plain sight, like Edgar Allan Poe’s purloined letter." – Jim Cramer [17:22]

6. Lessons from Cramer’s Early Trades

• Personal anecdotes: Early losses driven by lack of research (e.g., picking cheap stocks blindly), gains by leveraging an "edge"—real knowledge about a business ([25:20-27:30]).
• Key lesson: Only buy stocks you have some specific knowledge about, unless it’s a widely acknowledged best-of-breed business ([28:32]).

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7. Pitfalls to Avoid in Stock Picking ([31:40–36:03])

Cramer identifies groups of stocks/types to avoid:

• Cyclicals (boom-and-bust economy-linked)
• Financials (banks, insurers, prone to event risk)
• Pre-earnings speculative companies (no cash flow, pure hype plays)
• "LSD" stocks (“Low Single Digit” growth—mediocre defensive names)
• High fixed-cost, low-margin names (e.g., department stores, airlines, auto companies)

Notable Quote

"As I said before, the only real defense in the stock market is consistent growth." – Jim Cramer [36:05]

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8. Cramer’s Stock-Picking Criteria: The “Secular Growth” Playbook

• Secular growth companies: Thrive year after year, immune or adaptable to recessions and interest rates, with the ability to scale ([36:32–39:33]).
  • Example: Regeneron, which turned $1,000 in 2005 into $1.5 million by 2024.
• Traits to look for:
  • Observable, comprehensible businesses
  • Resilience to interest rate shocks
  • Fast recovery post-recessions
  • Scalability for the long term

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Memorable Quotes & Moments

• On Cyclicals: “We want one-way stocks that can thrive even in a bad economy.” [32:45]
• On Overcomplicating Investing:

  “Being a genius might have hurt you. A lot of people in this business are too clever by half—they see a good thing and overthink it, scaring themselves away from phenomenal winners.” [17:09]

• On Personal Responsibility:

  “Never buy something that you don't have any personal knowledge about.” [40:04]

• On Avoiding Pitfalls:

  “Filter out what’s not worth owning—makes stock picking a lot easier.” [31:40]

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Timestamps for Key Segments

• [02:13] – Episode proper begins, Cramer’s Index Fund critique
• [07:45] – Portfolio construction: 50% index, 5 growth, 1 hedge
• [09:22-13:00] – Call-in Q&A: young investors, ETFs vs. stocks, stop orders
• [15:00-17:45] – History of FANG, "Magnificent Seven," compounding returns
• [19:40-21:39] – Bessembinder’s research; “hero stocks” in plain sight
• [25:20-28:32] – Cramer’s early mistakes/triumphs; importance of an "edge"
• [31:40-36:03] – Five major stock-picking pitfalls/what to avoid
• [36:32-39:33] – Playbook: Secular growth stories, resilience, and scalability
• [40:04-46:16] – Investing Club email Q&A (dividends vs. growth, trimming winners, options, allocations, etc.)

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Listener Email Q&A Highlights

• Growth vs. Income at Retirement: For large portfolios, split allocation 50/50 between high-yield and growth ([41:48]).
• Options Strategies: Keep it simple; avoid overcomplicating with options ([42:21]).
• Rebalancing on Outperformance: Continue systematic buys unless fundamentals change ([43:18]).
• Managing Parabolic Winners: Trim position to lock in gains and maintain flexibility ([44:38]).
• Tax-Smart Holdings: Hold high-beta/growth in tax-advantaged accounts; use losses in taxable when possible ([45:00]).
• Dividends vs. Growth: Shift toward income as you near or enter retirement ([45:58]).

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Final Takeaways

• Balanced Approach: Index funds are a fine hedge, but true wealth is built by identifying and holding world-changing, secular growth stocks with discipline and patience.
• Accessibility: The individual investor is more empowered than ever—if willing to do real research.
• Edge and Homework: Never buy a stock you can’t clearly explain or lack a real understanding of.
• Focus on Quality: Avoid “boom-bust,” highly leveraged, concept-only, cyclical, or chronically slow-growth companies.
• Practical Wisdom: Always reassess, and adjust strategy and holdings as you age, tax circumstances change, or the market context evolves.

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“There’s always a bull market somewhere. I promise you I’ll find it just for you, right here on Mad Money.” – Jim Cramer [46:03]

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For more details, stock lists, and personal finance guidance, Cramer recommends his book "How to Make Money in Any Market" and joining the CNBC Investing Club.

Transcript

[Julia Boorstin]

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[Jim Cramer]

Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica. I'll be with my friends. I'm just trying to make you a little bit of money. My job is not just to entertain, but I'm doing some teaching tonight, so call me at 1-800-743-CBC. Tweet me at Jim Cramer. Let me tell you why I do this show and why I wrote how to Make Money in Any Market. For most of my life, pretty much everybody in America recognized that picking individual stocks was a fantastic way to get rich. As long as you did it right. Not everybody agreed on the right way to do it, but practically Everyone accepted it was certainly worth doing. Then the dot com bubble burst in year 2000 and picking individual stocks suddenly went out of style. At least for regular people. Suddenly there was a new conventional wisdom on Wall Street. The conventional wisdom of index fund supremacy. Almost overnight, legions of experts, backed up by an endless parade of non investing journalists, came out of the woodwork making a pernicious argument that you are either too stupid or too imprudent to manage your own money. They claim that it's more or less impossible to consistently be market. So you might just as well park all of your money in an index fund that mirrors one of the major averages like the S&P 500. The more extreme index fund absolutists like to say that no one can consistently beat the market. And if anyone looks like they can, or say is that they can, it's pure luck. That means picking individual stocks is nothing more than gambling where you have no edge. So why not settle for an index fund that can consistently give you 8 to 10% annual return? Sure you won't get rich, but you'll steadily make money over time. I like that. After the dot com bust and then the financial crisis, that argument became pretty darn compelling. This is the ideology though, that that is absolutist. And for that I think it's wrong. I've been fighting it since Mad Money first went on the air. Why? Because as I explained how to make money in any market, it doesn't work if you're willing to do the homework. And it's never been easier to learn about the companies behind your stocks. And individual stocks can change your life. They can make you rich in a way that no index fund ever could. And it happens. I have seen it endlessly with my own eyes. And hey, it's absolutely possible to beat the averages. Take the S&P 500, the benchmark of all benchmarks. There are 500 stocks in the S and P. Most of them are not all that good. In fact, at any given moment, I don't think there are 500 good stocks in the entire market. So when you buy AN S&P 500 index fund like this spy the spy, you're buying the good with the bad. Which brings me to the unvarnished truth. You will most likely not get rich just by owning index funds. That's why I still recommend putting 50% of your savings in index fund. I'm a believer, but that's purely as a hedge against the mistakes that do inevitably occur when you manage your own money. Picking stocks is high risk higher risk than owning an index fund. So you need the index half as back up. But at the end of the day, AN S&P 500 Index Fund is merely an amalgamation of a few good stocks with a lot of mediocre ones and plenty of flat out bad ones. The stocks of fresh faced wonders regularly get added to the index, but they're still outweighed by everything else. And that's the crux of my argument. If you follow your nose, eyes and ears, if you know how to look for opportunities, then I believe you can trounce the indices. But if that's the case, how did index fund supremacy become the conventional wisdom? Simple. There's a whole industry of financial advisors who can't afford to waste time focusing on you, focusing on regular people. That's not where they make their money. So the most responsible thing they can do is tell you to park your money in an index fund. You'll do okay, certainly better than you would keep in cash or checking account or money market fund. And the financial advisor never has to hear from you again. I'm not saying this to blame those guys. I was one of them. It's not like the professionals are out to get you. Even if they wanted to help you, they can't. Because you see, you're not rich enough. In my years at Goldman Sachs, I spent a lot more time trying to find billionaires to advise than helping regular people with their money. We called it elephant hunting. We were looking not for families with hundreds of thousands or or even millions of dollars, but with hundreds of millions of dollars. And this was back in the 80s when a million bucks went a lot further than it does now. And it takes just as much time to service someone with a small pot of gold as it does to help the oligarchs. Which is why these firms devote so much time to helping the extraordinary wealthy. So little time to help everyone else. Unfortunately, our financial regime in this country is actually a lot like our health care system. It's impenetrable and it caters to the wealthy. Anybody else has to hope that their provider has an ounce of knowledge and enough empathy to share it with you. The difference is that it takes years to become a doctor, but it's much easier to become your own portfolio manager. An index fund is what the financial doctors prescribe. When you don't have top tier insurers, it's the best they can do under the circumstances. But you can do better on your own as long as you're willing to put the work in. While I respect Index funds for what they are. They'll never give you enough juice to get you to really where you need to go. Consider them insurance against your individual stock portfolio blowing up in your face. They're a bit of a safety net. Your real gains though will come from the other half of your holdings which which I Recommend Putting in. 5 individual growth stocks across a diversified set of Industries and 1 non stock hedge like maybe gold or even crypto. The S&P 500 is the average choice. The stocks in the index are not selected for their greatness. They're selected because they mirror American business. The keepers of the index don't put a premium on growth stocks. Even though growth stocks have historically been the best performers. Again, I don't blame them because that's not the point of the S&P 500. But I do blame the people who insist that index funds are the best you can do. While there are some growth indices out there, I don't want you to own good growth and bad growth. I only want you to try to find the best growth companies. Those are the ones that, historically speaking, are most likely to make you rich. Sticking purely with the index funds will only make you average. Of course, it's better to be average than broke. Which is why I still advise putting half of your savings in an index fund like the spy, but. But you need to use the other half to go after bigger gains. Unlike most professionals I see, the world is divided between two kinds of risk. The very real risk that comes from losing money in a bad stock and the just as real risk of missing out on a great stock that could give you a 1000% return over time and transform your entire life. Unlike the index funds evangelists, I think you can walk with an index fund and chew bubble gum with individual stocks at the same time. Here's the bottom line. Like I explained in how to Make Money in Any Market, putting some money in an index fund isn't bad advice. It's a good way to play it safe. But most people can't afford to purely play it safe unless they're already rich. Which is why you have to put the other half of your holdings in the mix of individual stocks that you choose and a non stock hedge. How to pick them? Stay tuned and you'll find out. Let's go to Jacob in New York, please. Jacob.

[Caller]

Hopeful as well. My name is Jacob Green. I've been a fan of the show for a long time now. I'm from Long Island, New York. I'm in my sophomore year at Penn State. As a finance and accounting major at the Smeal Business School, I'm hoping to break into Wall street one day.

[Jim Cramer]

That's.

[Caller]

You were the one that got me excited to start investing.

[Jim Cramer]

Actually, my dad, Mr. Smith, got me excited investing. I'm sorry, but he was a great man. He was a great man. How can I help?

[Caller]

Yeah, so I have a question for you. I want to hear your advice on how should a young retail investor structure their portfolio to take advantage of long through ETFs and solid stocks while still leaving some room for riskier short term trading to keep things exciting.

[Jim Cramer]

Okay. I'm not so into the short term trading. I understand. I want to do that. I think you go with the highest growth stocks. You just really have your whole life ahead of you to be able to make a lot of money. So let's load up with an index fund, but then highest growth stocks and then pick one stock that you think is really speculative and it doesn't work, you get another one. But we're going to go for gusto. We're going to go for the best early on and let them compound. I want to go to Glenn, Illinois. Glenn.

[Caller]

Jim, I think he just answered my question. My question is a number of times in the past I've heard you say that you really like buying individual stocks and you seem to kind of dismiss the idea of being in mutual funds or ETFs. I was curious why you feel that way.

[Jim Cramer]

Okay, well, let's. Let's be sure. I have a huge amount of money in index funds and ETFs. I am not against them. I am saying that I am a throwback to the way it always was before people went nuts with index funds. I like to have a mixture of both. I can't own stocks myself, so of course I own mutual funds that I own and I own ETFs. But I just think they're part of the mosaic. Not all. That's my bias. The people who like only index funds, I call them into question. I am willing to coexist with them, but they're not willing to coexist with me. Let's go with Craig in New York, please. Craig.

[Caller]

Hi, Jim. Craig, it was great to meet you at the ALS fundraiser last month.

[Jim Cramer]

Oh, thank you. That's such an important cause. It's just such an important cause. We got to lick that disease. Wow. How can I help you?

[Caller]

Tom is a good friend. I have a large capital gain in my non qualified account. Reduce my risk. 20% long term capital gains.

[Jim Cramer]

Okay. We have to take another call. I'm sorry, we have to take another call. Look at Dave and then just say the next person.

[Caller]

So we have Kelly ready, right guys?

[Jim Cramer]

Yeah. I don't see Kelly there. I see Glenn. Kelly in Florida. Kelly.

[Caller]

Yes. Yes sir.

[Jim Cramer]

You're up. Go ahead. Okay. You're only Jim Kelly.

[Caller]

Thank you for taking my call. Mr. Kramer, I have a question on your philosophy on stop sell orders and trailing stop orders. When do you use them and what percentage you should set them at?

[Jim Cramer]

Well, I am always reluctant to use stop orders because sometimes what happens is you just blow right through your levels, end up with the worst price of the day. You're at the mercy of the market. I like to do set limit orders and I think that that way you will never come up with something that says how the heck did that happen to me? I'm not saying owning an index fund isn't a good idea. I love it. But you only make real money if you pair that index fund with some high quality stocks like we used to do before people went nuts owning just mutual funds that are indexed that lever only to the index on MadMoney tonight. If I'm teaching you all about how to make money in any market, starting with how I came up with my famous investing acronyms and how you can find out some of these on your own, then if you pick your own stocks, you have to have an edge. I'm giving you one mantra to keep in mind that will save you from embarrassment and losses. And there's plenty of stocks you can buy, but there are definitely others you should avoid. I'm running through the list of pitfalls that you should stay away from when looking for names to add to your portfolio. So stay with Kramer. Don't miss a second of Mad Money. Follow Im Kramer on X. Have a question? Tweet Kramer Madmentions. Send Jim an email to madmoneynbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com what made you confident.

[Podcast Narrator]

That you could do something that hadn't been done before?

[Julia Boorstin]

I have no fear of failure.

[Podcast Narrator]

Trailblazing women, changing the game One of.

[Jim Cramer]

My favorite pieces of advice, think about.

[Julia Boorstin]

What your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself.

[Podcast Narrator]

Life is short and you just gotta think big to accomplish big things. Julia Boorstin HOSTS CNBC See change makers and power players new episodes every Tuesday wherever you get your podcasts.

[Jim Cramer]

Like I told you before, the break we live in a time where picking stocks is stigmatized. Most respected experts in the industry are always telling you to own index funds. And for the most part, the big boosters of individual stocks often love to promote the most speculative stocks in existence. Insanely high risk stuff that often blows up in your face face. Tonight I'm coming out here to advocate something very different. Good old fashioned growth stock investing. Today this is widely considered heretical, but for most of my lifetime it was the most orthodox opinion on investing and it did well. I'm just trying to teach you what generations of investors knew to be self evident. Unfortunately, these days the sophisticated operators love to tell you that people are too stupid to manage their own money. I find it insulting, but I've got to tell you, when you look at the history, it's not that hard as long as you know how to stick to your guns. This is my thesis by the way. And how to make money in any market. In every market, there are leaders. These are what I call hero players we must strive to find. And man, sometimes they're incredibly obvious to find. Of course, I've had plenty of clunkers my day. But with the power of observation, some curiosity, those are the two things you need. You can absolutely identify some of these phenomenal winners. And when you find a hero player, even if it's just one stock in your five stock portfolio, that's enough to produce some tremendous life changing returns and maybe far outpace the S&P 500. Let me give you a little history back. On February 5, 2013 on this program I introduced the term Fang. That was Facebook, Amazon, Netflix and Google. And I urge people to invest in the four Fang stocks right then and there. And I really pushed it so hard, pushed it many, many days, many many years. The acronym was the culmination of Ideavelop. With the Trader and analyst Bob Lang, who worked with Meathestreet.com we were searching for a way to shine a spotlight on the best growth stocks of the time. We wanted everyone to buy. Decade later when bank of America strategist Michael Hartnett coined the term Magnificent seven for the slightly expanded and adjusted group of Alphabet, which is the old Google, Amazon, Apple, Meta platforms, that's the old Facebook, Microsoft, Nvidia and Tesla. I went all in my chapel, trusted Oreo and six of the 77 save Tesla. So it seemed only sensible. You can now file the trust by joining the CBC Investing club. So you have to ask how did I spot Fang or Fang, which was how I integrated Apple and why Was I so quick to embrace six of the Magnificent Seven years before the term was coined? Simple. My eyes were open. I'm always hunting. Not just for Amazon, but for the next Amazon or the next Netflix. Next in video. Once the Magnificent Seven lose their magnificence, then there are another seven out there. Believe me, they're just waiting to be found. And they too could be very obvious. But as long as I think these proven winners can stay strong and deliver, I'll stick with them. That said, look, I'm confident there are many, many more amazing growth companies with incredible stocks around. I hear about that. Every I hear about it, I hear from you in the lighting round. Here's the thing about Fang and the Magnificent Seven. They were obvious. They were in your face. You could see them moving higher day after day for years. Your kids can tell you all about them. In some cases, these went up for more than a decade. You didn't have to be a genius to make money in these things. In fact, being a genius might have hurt you. A lot of people in this business are too clever by half. They see a good thing and then they overthink it, scaring themselves away from phenomenal winners. Let's say that on the day I introduced Fang, the Fang acronym, remember, this is when these companies were already established already, the big ones you knew about, no incredible discovery required. You decided to put $1,000 into each of the four. Let's do the math here. And then you put an equal amount, $4,000, right? Because there's four, into an S&P 500 index fund. Now, from that day in early 2013 through the end of 2024, your $4,000, the S& P would have been terrific. It would have turned in $19,400. That's a 14.2% annual return. Not bad. Let me ask you. What if you invested $1,000 in each of the four FANG stocks like I suggested? Adding a lot. Fang would have given you your four grand. $82,655 from 2013 to the end, you would have had. Which would you prefer? 82,000 of those four Hero stocks are less than 20 grand. The SB500 index fund. It is a choice. It's your choice. It really is. Oh, and Apple, which hadn't been added to Fang at that point, would have turned in your turn $1,000 into $17,994. So double A. Fang was also a winner. Does this prove anything? I'm sure that some people say, hey, listen, it's backdated. Others Be saying it's cherry picking because those are five, the greatest stocks of all time. Yet here's the deal. Why that's not true. I was coming on air practically every night and recommending fan they were hiding in plain sight like Edgar Allan Poe's purloined letter. They were companies that you probably interacted with every day. Why can't you find them? They were there for you. You knew them. They were available and obvious to anyone who cared to pay attention. In fact, before I aired the segment on Fangway back in 2013, you know what I did? I wonder if it was a waste of time because these four stocks were so obvious. Everyone knew them. Was I really bring anything new to the table by highlighting them? In retrospect, it was good to pay attention. Still is. But let me. Let's put my personal examples aside for a minute. A couple of years ago, an economist from Arizona State University, a fellow by the name of Hendrik Bessembinder, published a paper on the difficulty of picking individual stocks. Now he's another possible index funds because he found that only a small number of individual stocks produce the vast bulk of the market's gains. I look at the same numbers and come to a very different conclusion. Looking at data from December 3, 31st, 1925 until December 31st, 2023, Bess and Bender sought to examine how well you could do with stocks provided you reinvested dividends and didn't sell. His first finding. Historically, the majority of the 29,078 stocks he looked at did not make money. Now shouldn't shock you. I'm not telling you invest in just any old stock. Most stocks have zero pedigree and their gains are often the product of an overthusiastic public and greedy investment bankers trying to feed the maddening mob. His second finding. There were thousands of stocks that would have absolutely made you money, but perhaps not enough to justify investing in them instead of an index fund. Now, a decent return, but an average return for average investors who want to see average gains. Index funds, they're fine, but they're not the heroes we're looking for. And remember, I still advocate them. His third finding. 17 stocks delivered cumulative returns of more than 5 million percent or $50,000 per dollar invested. That means a thousand dollar investment would have yielded upward of $50 million. All right, these were all relatively well known companies. Boeing, IBM, Coca Cola, Deere, Johnson and Johnson. They could have made your fortune. Bessembayer thinks that that's like finding a needle in a haystack. Do you think that? Do you really? The Bottom Line it's only hard to find these hero stocks if you're picking randomly for anyone with eyes to see. We're talking about obvious winners that tend to keep winning for years and years. Those are the stocks I'm always looking for, and when I find them, I'm never going to shut up about them. Net Bunny's back into the break. What made you confident that you could do something that hadn't been done before?

[Julia Boorstin]

I have no fear of failure.

[Podcast Narrator]

Trailblazing women Changing the Game One of.

[Jim Cramer]

My favorite pieces of advice Think about.

[Julia Boorstin]

What your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself.

[Podcast Narrator]

Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts.

[Jim Cramer]

All might have been making the case for picking individual stocks rather than parking all of your money in an index fund that mirrors the S&P 500. As I point out in how to Make Money in Any Market, very few stocks generate tremendous long term outperformance. But the ones that do rarely come out of nowhere. They tend to be obvious, high profile, usually in the kind of business that you regularly interact with in your everyday life. But this is a big but. If you're going to pick your own stocks, you need to have an edge. When I got started in this game I was it was much harder to access information, which made investing a real headache. Very time consuming. At the same time though, it was also much easier to get an edge to know something that other investors don't because there was all sorts of data buried in places that no one would ever look. These days everything is on the Internet. A few search queries, maybe a little dialog with one of the chat bots and you can access most of what's relevant that you need to pick a stock. You barely even need to think about it. In my day. It was very different when I got first When I first started picking stocks, I was working at a thing called the American Lawyer in New York City. I moved from the backseat of my Ford Fairmont to my sister's cat. I was able to put away a little money, so I opened a brokerage account and started reading articles and business publications. Back then I was always keeping an eye on stocks with low dollar prices, single digit names because I assume I get more bang up for my buck if I could buy more shares at once. God, I was young. But back Then you had to speak to a human when you place an order. And I didn't want to embarrass myself by saying I want to buy seven shares or something. I can imagine the broker on the other end snickering to herself, laughing at me while I was paying my 2% of the trade during commission. A couple of bucks perhaps. Now most brokerages charge you no commission at all and you can do it all without ever speaking to a human. Of course, I had no idea what I was doing when I got started. My first stock. Stock called American Agronomics. It was a Florida based company built around orange groves. The American layered Forbes sent to its library. And I figured nobody knew stock better than Forbes, right? Forbes recommended the stock. What could be better than owning an orange grove? People are always going to be drinking orange juice, right? Keep in mind this was a few years before Trading Places, an all time great comedy with Eddie Murphy and Dan Aykroyd where the bad guys lose a fortune trading orange juice futures. But I don't think Eddie Murphy was even on Saturday Night Live at that point. So I bought 10 shares. American Agronomics for 10 bucks each. Then I sat back to watch the magic happen. Well, almost immediately, Florida had a rare flash frost and the stock almost went to zero. Desperate to make money, I dug deeper until I could find a stock that sold for an even lower price again so I could buy more shares. I returned to Forbes and this time I found a stock called Bobby Brooks was a woman's fashion company. As little as I knew about growing oranges, I knew even less about women's fashion. Didn't matter at just 2 bucks apiece. I mean I bought 100 shares. How much could I lose? How about everything? Soon after, bought the stock and started slinking lower and then lower again. Bad selling season? Wrong. Close. Bankruptcy. Yikes. I remember thinking that the saving grace of the stock market was that a declining stock can't go below zero. In retrospect, given that I knew nothing about women's fashion, I deserved to lose everything tonight. And that's why I decided my mistakes was not knowing more, much more about these companies than what I read in Forbes. These articles were meant to be a starting point, yet I was treating them as an end point. The last thing I looked at before I pulled the trigger. I done no research on either stock and I couldn't figure out where to start. I was close to giving up until I got a call from a childhood friend who told me that there's some hiring going on in the neighborhood. That I was in Philadelphia. He told me that a local fastener company, Screws Bolts, was looking for workers. Was called Standard Press Steel SPS. Almost 80 years in business at the time. He suggested maybe I should take the job. It was much better than money I was making as a journalist. Although that's a low bar. I didn't take the job. But you know what? I recognized what my friend was telling me as useful information. Standard Press Steel was hiring. That must be. Must be doing well. The Stock was at 35. I had to wait until I could replenish my coffers enough to buy 5 shares before pulling the trigger. This time I decided to learn a little more about the company. Was it making money? Was it losing money? Here's a simple lesson. When a company got so much business that it needs to hire more workers to meet demand, that's a good sign. But that was all I knew. So I decided to hit the books. I found a kind librarian, New York City's giant flagship library, who passed me off to a second librarian who knew something about business. She explained to me that public companies had to file anything important that they did with the securities Exchange Commission or sec. She sent me to a separate library in a separate building that had those filings. There was no central index of anything back there. No search query, no recent information. I was flying by blind. All I knew was this company, SPS needed workers. I decided, you know what? That's enough. I bought my 5 shares, stock immediately jumped and I made 15 bucks. That didn't make up for my previous losses. But I decided it was tricky to make some money in stocks. I sold it. Looking back, I should have stuck with SPS was eventually bought by Precision Cash Sports, which in turn was bought by Berkshire Hathaway. After I sold my shares, I analyzed what I'd done right and what I'd done wrong in these first three trades. Something that has become a ritual for me on every trade. On the first two, American Agronomics and Bobby Brooks, I was basically just relying on journalists who were relying on sources who wrote articles that they thought were right. I liked the orange grove stock because I figured that people always drink orange juice. What kind of edge was that? I also liked it was only $10, but that was irrelevant. As for the flash frost that wiped out the orange harvest, I lived in Florida. I'd even covered a couple of these freezes for the Tallahassee Democrat right out of school. No excuses there. My Bobby Books trade was a pure revenge trade because I was trying to make back the money I lost, but it turned out to be revenge against myself. Knew nothing about women's clothes, nothing about the cut, nothing at all. I didn't even know how to read the numbers. Not that I looked at them. What did I know to win in sps? I knew something that wasn't widely known. At least back then I knew they had more business than they expected. It wasn't everything, but it was something that few outside my neighborhood would have known. I had an edge. Which brings me to the bottom line. As I explained in how to make money in any market, you should never buy anything that you don't have some personal knowledge about unless the stock in question belongs to a well known best of breed operator. But for the vast majority of stocks, don't even think about buying them unless you actually know something about the underlying company. And remember, it's never been easier to find out. Let's go to Lois in Massachusetts. Lois.

[Caller]

Hello Jim.

[Jim Cramer]

Hello. How are you?

[Caller]

I'm Good.

[Jim Cramer]

Good.

[Caller]

Do I 29 plan to save for college? And should I wait for the stock market to go down before we invest?

[Jim Cramer]

Okay. I like any plan that gives you any tax benefit. I talk about that and how to make money. It's really important to take advantage of anything that the government does that makes it so you pay lower taxes. And that's why I like that plan. Let's go to Dean in Florida, please. Dean.

[Caller]

Hey, Jim. Big booy.

[Jim Cramer]

How are you?

[Caller]

From the southwest coast of Florida.

[Jim Cramer]

Excellent. Been there. Loved it. Thank you.

[Caller]

So I had a question for you. You've always said there's a difference between retirement money and mad money. How should I invest in each bucket?

[Jim Cramer]

Well, I have a list of stocks in how to make money in any market, which is a switch from companies that are growth companies and companies that have some growth with a very nice yield. And that's what you have to switch with. What's really important is you don't just go into cash because cash won't earn you enough and you'll end up having to work until the day you die. I'm trying to prevent that with a group of stocks that can give you both but not at a cost to you. Growth with yield. That's what I like. All right, everybody. Never buy something that you don't have any personal knowledge about. Don't even think about even buying a stock unless you actually know something about the underlying company and you can explain it to someone. Watch where I'm at, Bunny. At I'm giving you my criteria of pitfall stocks to Avoid when you're building a portfolio, then there's two key words to keep in mind when you're looking for a stock that can make money in any market. I'm revealing what they are. And later I'm opening my tweets and texts and emails and taking some of your questions. So stay with Kramer. All might have been making the case for my new investing playbook. Put half your money in a cheap index fund and then put the other half in a portfolio of 5 individual stocks and 1 non stock hedge like gold or Bitcoin. This all laid out, by the way, and how to make money in any market. So far we've been talking about why it's worth picking individual stocks. But now I want to talk how how you do it. As in, what the heck are you supposed to identify the five stocks that are worth owning in your portfolio out of thousands of stocks that trade the United States? What you want big picture are stocks that meet two criteria. They need to be observable, meaning you can see what the companies do and they need to be doing something that you're genuinely curious about. Is it really that easy? Of course not. But those are the first two questions you need to ask. Because if it's not observable and it's not something you're curious about, then how are you ever put in the time to find out if it's even worth owning? Believe me, you'll stop now. Say you're getting started and you spot a company that jumps out as winner. You can feel it in your bones. But let me be blunt. Odds are you're wrong. Right here is where most people make the worst mistake. They somehow feel that they know more than the market does about a given stock without doing any research whatsoever. The truth is, you'll never know more than the market does unless you have inside information. But if you trail inside from information, you're going to go to prison. Like I mentioned before the break though, you should have an edge when you invest in something. But these days that edge likely won't come from knowing information that others don't. So again, you're never going to know more than the market. But that's not necessarily because the market's constantly making mistakes and judgments. See, your edge comes from being right about something that Wall street is wrong about. Before we dive into the details, though, I want to help you steer clear of some pitfalls. Frankly, you can make the process of stock picking a lot easier by first filtering out what's not worth owning. And at any given time, there are a lot of groups that simply don't make the cut. For example, you've got these cyclicals, those the boom and bust companies that are more or less hostage to the broader economy. Their earnings fluctuate like crazy. Think the full price retailers or the suppliers of building materials or discretionary entertainment companies. If the economy is good, they thrive, right? But in bad times, look at the materials companies, the ones that make steel or copper or chemicals or paper. Their earnings per share are incredibly volatile because they're joined at the hip with a broader economy. I don't like that the stocks of these cyclical companies are worth buying when the economy is real ugly and then we're selling when the economy's red hot. In the end though, I see them as two way stocks. And as I explained how to make money in market, we want one way stocks that can thrive even in a bad economy. Even the best. The cyclicals are hostage to these economic forces. They're not what we're looking for long term. Second group companies that are meant to go up slowly over time, but might be overcome by sudden churns and interest rates of Fed policy. Think the banks, insurance companies, lenders. We call them the financials. Again, there are times the financials can make you big money, but they can also be overthrown by events that they have no control over. Financial institutions can vanish overnight like they said somebody did during the crisis from 1988 to 1992. They're the first stocks to get crushed in a downturn because they have exposure to credit risk and can suffer crippling defaults when borrowers lose their jobs and can't repay afford to repay. They're the first to sink during an inflation scare too, because that causes the Fed to slam the brakes in the economy. In other words, the financials are not stocks that can make you money in any market. Third group to avoid fleeting companies with no earnings that are strictly conceptual. Typically a third of the stocks I get asked about fall into this category. Most of them lose gobs of money and will never amount to anything. But when Wall Street's in love with speculation, their stocks can soar. Unfortunately, these ultra speculative plays always come right back to earth when the stock market takes a turn for the worse. They are stocks that work only in bull markets. Fourth group of stocks that present themselves as growth vehicles but suffer from a severe case of what I call lsd, not the drug lsd. LSD is Wall Street's peak for low single digit. As in low single digit growth rate rate. Many consumer packaged goods companies fall into this category. In the old days, we call them safety stocks because they tend to have high dividends that would protect you during a downturn. These days, though, they don't seem to protect give you much protection at all. All you get is mediocrity. Finally, there are companies with fixed costs that are so darn high, it takes a perfect storm of positivity for them to make good money. Here I'm talking about the department store chains, the automakers, the airlines, the automakers in the airlines as well, especially of insanely expensive labor contracts and a lot of heavy duty machinery. Again, there are times when these stocks work, but they only work temporarily. And you always know that you'll have to completely ring the register before the business peaks. So here's the bottom line. As I said before, the only real defense in the stock market is consistent growth. So when you're building a portfolio for the long haul, you want to steer clear of companies that can be derailed by income consistency. And honestly, that is most of the market. You take those groups off the table and it's much easier to find something that you can stick with for years and years. M's back after the break. Like I told you before the break, there are all sorts of stocks that only work under certain situations. There's nothing wrong with that. But when I wrote how to Make Money in Any Market, I meant that title literally. For example, the boom and bust cyclicals that are hostage to the broader economy have an expiration date when they can make you good money in expansion for a year or two, or even three. Sooner or later, the economy's going to peak and you need to sell, because owning the cyclicals into a recession is a recipe for disaster. So what cohort can make money in any market? What we're looking for is something called secular growth. Now, that has nothing to do with separation of church and state. It's an economic or scientific context. Secular just means extremely long term. You want companies that can put up strong revenue growth year after year after year with expanding gross margins that translate into terrific earnings. You want something that can do that for years or even decades, regardless of the economic backdrop. These are the companies that can survive a dramatic uptick in interest rates or severe slowdown in the economy, which is what usually comes after those high those rate hikes. What exactly allows a business to survive a massive rise in interest rates? Simple. If your company doesn't need to borrow money and its customers don't depend on financing to make the purchases, then it doesn't have to worry about interest rates when the meme stock guys pushed amc, the movie theater chain, and as a turnaround play, I knew the stock would have a limited shelf life because the balance sheet was heinous and the company needed to borrow too much money to get back into growth mode. That doesn't mean I'm against all companies that borrow money. That would be absurd. Amazon and Tesla borrowed vast sums of money when they were getting started, but they both had massive opportunities in front of them. Very different from say, an AMC which is borrowing money just to stay afloat. For that, you need to examine the balance sheet and the cash flows. You can look this stuff up yourself, but honestly, if you ask the chat bots, they're surprisingly helpful when it comes to doing just that to balance sheet questions. That said, better ask more than one chat bot to play it safe because even the best of them still are totally they're not totally reliable. I find that to be the case every day. That aside, I told you secular growth stocks need two things. The ability to survive high interest rates and the ability to survive and even thrive during a recession. So let's talk about the recession side of the story. If you want to know how business handles the slowdown, just check the history. How did it do during the Great Recession after the financial crisis? How did it do during the brief Covid recession that came out along when the Fed started aggressively raising interest rates in March of 2022? Even if the stock in question got clobbered, I'm not too worried as long as it was able to bounce back rapidly once the stock market found its footing. And look, once you find a company that can handle higher rates or weaker economy like the magnificent 2007, you've got my blessing to buy those stocks. Even if they look expensive with high priced earnings multiples. Wall Street's willing to pay through the nose for consistently strong earnings growth. And you know what? You should too. Finally, when you identify a company that's rate proof, rate hike proof, and recession proof, you want more quality. The ability to scale. Meaning does it have the capacity to grow into a much, much larger enterprise? Let me give you my favorite example here, because it's where I got my viewers and one in on the ground floor. And it's really emblematic of what I'm talking about. A company called regenerat. When CEO Lynch Leifer came on Mad Money in April of 2005, he was one of our first guests. At the time, Regeneron was an early stage biotech that was developing potential cancer treatments that Might maybe have been useful for age related macular degeneration too. Back then the stock was trading at less than $5 and I told you it was worth speculating on. Hey, maybe better than an index fund. Turns out Regeneron's macular degeneration drug was a blockbuster, eventually doing nearly $10 billion in annual sales at its peaks. This is the great thing about biotechs. When they hit it big, they can transform a tiny development stage company into a pharmaceutical powerhouse. If you invest in just $1,000 into Regeneron when Len first came on the show in 2005, you would have had over $1,500 by the end of 2024. That's what I mean by having the ability to scale. So here's the bottom line when you're searching for stock picks as I tell you in how to Make Money in any market, you want great secular growth stories that can handle high interest rates or weak economy and have the ability to scale. Meaning you can see how they might eventually grow into something enormous. Those are the kinds of stocks you can own for years or even decades, racking up tremendous gains as long as you regularly do the homework so that you can fail if something ever goes really wrong. Or stay long for the glorious compounding ride. Stick with Kramer. I always say my favorite part of the show is answering questions directly from you. Tonight I'm cracking out my emails from Investing Club members answering all your investing questions. If you like this, please don't forget to join the CBC Investing Club. First up, we have a question from James who asked Jim, I am 65 years old and investing my portfolio for growth and income for the next 25 years. Is it time to start allocating more investment dollars into dividend paying stocks or stay with 65% growth value and 35% dividend equities? My total equity portfolio is 4.5 million. Well, first of all, congratulations, you've invested very well. Second, because of that amount, what we're going to do is we're going to put 5050. We're going to make it so that you've got some great slower growth, high dividend plays that can compound and generate that income you need. And I agree with you, let's keep the growth for the rest. But you do have to cut back on pure growth because I like the idea with that amount of money you have that you never lose it once you get rich. Well, let's just say you only need to get rich once. Next up we have a question from Albert who asks when, if Ever. Might it be appropriate to protect multiyear upside gains that are significant but unrealized with protective calls or other option strategies? Let's not fool around with them. I know a lot of people don't do that. Like we want to sell covered calls. A lot of people want to get involved in the options market. I like to keep it simple, especially because you know what you don't want to ever have, let's say, all your stuff. More than one piece of paper. I am a firm believer that one piece of paper is the way to go. And you can't do that if you kind of mess it up with a lot of option strategies that I don't think are going to do that much for you. Now let's go to Thomas, who wants to know, how can we strike the proper balance between building a new position while respecting our cost basis on a profitable and fundamentally sound stock headed higher. Okay. You always have to think, should I sell one to buy another? I don't like to have a huge number of stocks. I don't want you to be a mutual fund. So what you have to do is you have to look at your portfolio. You have to say, this one's come to fruition. There's not that much more. And I'd like to put a new one on. But don't put a new one on until you sell another. Now let's go to Zachary in Nevada who asks, with a five core stock portfolio. Thank you. That's what we do. That's what we recommend. What should we do when stocks are all outperforming the market? Do we keep buying them on a set schedule even though they are consistently going up? Or just new deposit allocations from 20% evenly to a more weighted allocation? I like to be a little bit more on autopilot. One puts more money to work. All the studies that I did, we had just Ben Stodo and Jeff Marshall went over and over and over again. The best thing to do is just to continue to put money in those stocks. Unless something's wrong and then you can change up. Our next question is from Michael in New York, who asks why do stocks tank when a company barely misses earnings? For example, estimates say $2 billion in revenue. They post 1.9 billion. Stock gets smoked. In the grand scheme of things, does a tiny miss like that really matter? And why does Wall street punish so severely? Wall street has what's known as a whisper. Okay, there's another. Another set of numbers that are far better than the ones you're looking at. And When a company can't do those far better ones if they, if they over promise and under deliver, then there's just no place for them and the big institutions will sell. Is it right to do that? There are. Sometimes they throw out babies with bathwater but for the most part I've got to tell you if they can't hit the whisper, they can hit the higher number. You know, sometimes you do have to take action. I'm not against what they do next. We have a question from Mimi in California asks what is the best way to avoid riding a long term investment all the way up and then all the way down? Look what we do in the club when we have a parabolic move. When we have a stock that is well above our basis, we trim. That gives us the flexibility to be able to buy back. I call it trading around a position position. Is it something I do very often when we get a parabolic move? The answer is yes, always. Now on to Dave in Arkansas. I am fortunate to retire my mid-50s for significant IRA and taxable accounts. What's the best in best investment strategy? Hold high growth and beta stocks in my IRA to avoid capital gains. All of them taxable. So if they drop, I can take the loss. Appreciate your advice in this. It's the former, not the latter. You want to be in the. Keep them in the Iraq and I like your spirit. I want you, I want you to keep investing for the long term and don't feel like when you get to 60 or something it's time to cash out. We don't like that. Next question is from John of Virginia. How often do you review targets and what makes you sell at a target versus raising the target? This is something that I go very closely with Jeff Marks and Zef Human and any time we have to raise the target, we all talk about it and try to figure out exactly whether it makes sense. We don't want to over promise ourselves that under deliverance but we also know that there are a lot of situations where it's just not worth it to, to raise it. If we think that there is some hesitation for us, we want to wait till the stock comes back down before we take from a 2 to 1. Our last question comes from Jack who asks when does it make sense to buy dividend stocks versus growth stocks? Okay, depends. I mean look, there are some, there's some dividend stocks I just love like growth stocks and their dividends. There's lots of growth stocks that pay dividends. But as we get older I do want to have more income coming in. And that's something you consider. And by the way, I address that directly and I think I don't want to cut it short, but I address it directly and how to really and how to make money in any market. And I really try to give you a list of the types of stocks you need to switch to as you get older. I like to say there's always a bull market summer. I promise you I'd find it just for you right here on Man Money. I'm Jim Cramer. See you next time.

[Podcast Narrator]

All opinions expressed by Jim Cramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by Kramer on television, radio, Internet or another medium. You should not treat any opinion expressed by Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Kramer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Mad Money disclaimer, please visit cnbc.com madmoneydisclaimer what made you.

[Jim Cramer]

Confident that you could do something that.

[Podcast Narrator]

Hadn'T been done before?

[Julia Boorstin]

I have no fear of failure.

[Podcast Narrator]

Trailblazing women, Changing the game One of.

[Jim Cramer]

My favorite pieces of advice?

[Julia Boorstin]

Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself.

[Podcast Narrator]

Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts.