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

Jim Cramer advised caller Dave to put two-thirds of a retiree’s $600,000 tax-deferred portfolio into an S&P 500 index fund. The retiree, Dave’s girlfriend in her early 60s, pays an advisory firm about $6,000 a year, or 1%, and Dave said her portfolio had lagged the S&P 500 and largely avoided the Magnificent Seven, a group of mega-cap tech stocks. Cramer, host of CNBC’s Mad Money, said his former hedge fund returned 24% annually over 14 years versus 8% for the S&P 500. He rejected strict efficient-markets theory, which holds prices already reflect all information, because markets often act irrationally, but described index funds as best for most investors and suggested six to 10 stocks for the remaining third.