CNBC’s Jim Cramer advised investors on how to build a balanced portfolio, recommending both individual growth stocks and index funds.
“Putting your money in an index fund is not bad advice; it’s a good safety net,” Cramer said. “But most people, unless they’re already wealthy, can’t afford to play it purely on the safe side, so the other half of their holdings should be invested in a combination of individual stocks of their own choosing and non-equity hedges.”
Picking your own stocks can be profitable, Kramer argued. However, he noted that this practice also comes with risks, and investors need index funds as a backup to guard against inevitable investment mistakes.
Kramer continued that index funds are average by design and are meant to reflect U.S. business. He pointed out that index funds alone won’t necessarily give you the same returns as top-growth stocks.
He suggested that investors looking to earn above-average returns should buy multiple stocks in a variety of industries, as well as commodity holdings such as gold and cryptocurrencies. Kramer emphasized that it’s wise to look for blue-chip growth stocks that have historically performed well. Kramer said it’s also important to be “hard at work” when managing a portfolio, which means continually researching companies, keeping an eye on earnings reports and following industry news.
“Of course, it’s better to be average than broke,” he said. “That’s why I still recommend investing half of your savings in an index fund like SPY, but the other half should go toward higher returns.”
