Cramer Beat the S&P At His Hedge Fund But Advises Retail to Join The Index

Jim Cramer says his old hedge fund returned 24% a year over 14 years, triple the S&P 500’s 8%. Yet he told a caller to put two-thirds of a retiree’s $600,000 into an S&P 500 index fund.

Cramer, host of CNBC’s Mad Money, still insisted that homework-driven stock picking can beat the market.

Why Back the S&P 500 After Beating It?

Citing that after-fee record, he rejected the strict efficient markets hypothesis, under which prices already reflect all information. Markets often act irrationally, he said, which gives stock pickers an opening.

However, he called index funds best for most people, a view he says dates to 2000.

Cramer called the deciding factor suitability, meaning an investor’s available time and temperament.

A caller named Dave asked for his girlfriend, a retiree in her early 60s with $600,000 in tax-deferred accounts.

Her advisory firm charges 1% a year, or roughly $6,000 on that balance.

Dave said the portfolio lagged the S&P 500 and largely avoided the Magnificent Seven, a group of mega-cap tech stocks.

“Obviously, if they can’t beat it, just go for and join it.”

Jim Cramer, host of Mad Money on CNBC

Where Do Stock Picks Fit in the Plan?

For the remaining third, he suggested six to 10 stocks, with two or three overweighted, mostly Magnificent Seven names.

Picking stocks takes real work, he said, while index investing is relatively easy.

He also said he now trims winning positions after a 20% rise.

Days earlier, Cramer picked gold over Bitcoin (BTC) as a portfolio hedge, though he did not dismiss the asset.

Cramer said most new money entering the market already flows into index funds. His answer to Dave points the same way.

The advice suggests that even a self-described outperformer treats passive funds as the default for most savers.