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For 16 years, the exuberant James J. Cramer has celebrated the joys and rewards of playing the stock market. On CNBC’s Mad Money With Jim Cramer, the former hedge fund manager analyzes economic trends, interviews CEOs and gives lightning-fast buy-or-sell investing advice to viewers. Ever enthusiastic about searching for stocks that will outperform the market, Cramer, 66, recently announced new ventures to spread his active-investing gospel.
But Cramer, to comply with ethical restrictions, hasn’t used his own wealth to buy individual stocks for years. Instead, he trades on behalf of a charitable trust. All his personal stock investments are in index funds — funds on autopilot, with no stock picker at the helm, filled with shares of companies representing a broad slice of the market.
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Perhaps more surprising: Cramer cashed out half of his own investments in 2020. And despite his show’s focus, he thinks that for many people, trying to invest in stocks that will beat the market is a terrible idea. He explains himself to AARP senior editor George Mannes (who worked at TheStreet.com, cofounded by Cramer, from 1998 to 2005).
How is your personal money invested?
Let’s say it’s a pie chart of a hundred percent. The breakdown I used to like was 80 percent in U.S. stocks, 10 percent in international stocks and 10 percent divided between gold and [cryptocurrencies].
What do you mean, “used to like”?
That’s what I did. But when I turned 65, I cut that in half. Before, I had almost no money in cash. So now I have 40 percent in U.S. stock index funds, 5 percent in international, and 5 percent split between gold and cryptocurrency. The other half of my money is in cash.
Why the change?
I had this long discussion with my wife, Lisa, when I turned 65, and she said, “You know what? You’ve always said that you’ve got to cut back [on stocks] as you get older, but you’ve refused to.” And I said, “Well, I really feel I should have as much exposure to the stock market as possible.” And she said, “We got to be wealthy. What is your point? We can only get unwealthy. That’s all that can happen to us.”
I said, “Yeah, but first of all, my dad lived to almost 92, and I always tell people that you don’t want to bet against yourself — that stocks are better than any other investment.” And she goes, “No. No. You’ve got to be true to what you always say: You only need to get rich once. We can’t keep risking.”
We’ve had many disputes about this. She has said over and over again, “What happens if I outlive you? I don’t want to feel that I am in trouble — that I had a lot of money, and that somehow, because my crazy husband decided to let it all roll, I don’t.” So I cut [our investments] to where I think it’s reasonable.
I believe everybody has to sit down with their partner, and both people have to be comfortable. I could have easily said to Lisa, “I have a TV show, I worked at Goldman Sachs, I was a hedge fund manager. This is what we’re going to do.” And I’ve come around to thinking that that’s wrong, that money’s a partnership, and that the partnership has to be over the dinner table, and everybody has to be happy. I need her to feel really confident, and her confidence was to cut back a lot of stock. So I did it.
How did you feel after that?