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Financial Wisdom - Jim Cramer


Financial Wisdom by Jim Cramer

Jim Cramer, is a former hedge fund manager and probably most famous as host of "Mad Money" on CNBC. He attended Harvard University, graduated magna cum laude and was President and Editor in Chief of the Harvard Crimson. He continued his education in Harvard Law School and received his juris doctor degree in 1984. His career in finance started with his joining Goldman Sachs and he later signed with CNBC to host "Mad Money".

Here are some of the ideas advocated by Jim Cramer...

Think about future college expenses early on: Jim is a strong backer for the 529 plan (available in the US residents) which is essentially a savings plan which offer some tax advantages, thus allowing one to grow the value of the portfolio. According to Jim, saving for college should begin even when a child is just a toddler 

Refrain from splurging unless it brings value to life: Jim is against frivolous spending when dining out, claiming, "I will not spend money on liquor". In his understanding, the markup restaurants add to alcoholic famously doesn't add to the enjoyment of the meal. Unless it is a super-special event, Jim do not believe that upgraded seats add much value to the experience when attending public events.

Focus on eliminating high-interest debt first: this is especially for debts on credit card accounts. Credit card companies charge more money every month than one can earn in returns on investments. As a result, it's important to eliminate these financial burdens as quickly as possible. This means getting serious about paying off debts before going all in on investment opportunities.

Invest in 2 discrete buckets: investors should park their money into 2 accounts as they plan for the future. There are multiple forms of investing, with retirement assets forming the longest term possible and other investment profiles settling somewhere between medium and long term. Investments placed into a retirement account can't be withdrawn early without penalty while the 2nd account to in an account that's easy to trade with and equally simple to deposit and withdraw funds from.

Diversification is crucial: investing across a wide range of assets or classes will protect one in the event of a downturn in the market. Changes in market conditions are inevitable, and a series of bull and bear runs will continue. Thus, having a diverse portfolio will helps smooth out downturns in the market. Diversification minimizes losses, a crucially important feature in any investor's philosophy. 

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