This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Jim Cramer's 'Mad Money' Recap: Cramer Opens His Playbook

But many 401(k)s also severely limit your investment choices, Cramer said, and many of the options include high fees from the few mutual funds they offer as well as fees from the 401(k) plan administrator as well. That's why Cramer only recommends 401(k) plans if they have an employer match. Once the match is met, he prefers individually run IRA accounts where investors are in complete control and can pick individual stocks.

Too Many Choices

Sometimes, too many choices can be a bad thing, Cramer told viewers. That's certainly the case with investing in a world where the sheer number of mutual funds, hedge funds and exchange-traded funds will make your head spin. Nearly half of all American households have exposure to mutual funds, Cramer said, which makes picking the right ones pretty important.

Cramer said overall he's not a fan of mutual funds. He said in addition to their high fees most fund managers don't get paid for performance, which explains why most actively traded funds fail to outperform the averages year after year after year. Even if a fund does manage to eke out a gain, Cramer said chances are its fees will strip you of most of it.

So which funds does Cramer recommend? He suggested investors look for low-cost index funds whenever possible, something that mirrors the S&P 500 with the smallest fees possible. Investors should especially avoid sector-based funds, as those don't offer enough diversification, and most ETFs, as those are designed for traders, not investors.

One exception to this rule is the SPDR Gold Shares (GLD) ETF, which tracks the price of gold. Cramer said this fund is an excellent way to easily add gold to any portfolio.

Roth IRA or Traditional?

With all this talk of individual retirement accounts and 401(k)s, the question inevitably arises of which type of IRA to start, a traditional IRA or a Roth IRA? Cramer offered his thoughts on the issue.

Cramer said investors can open a Roth IRA if they earn less than $127,000 a year and they can withdrawal their money after age 59 and a half. The only difference between a Roth and a traditional IRA is whether you pay taxes now or pay them later.

As a general rule, Cramer said if your marginal tax rate is less than 25%, then a Roth IRA will likely make the most sense. For those in higher tax brackets, paying taxes later on, such as in retirement when rates are lower, typically is better.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,454.47 -108.83 -0.66%
S&P 500 1,918.02 -12.65 -0.66%
NASDAQ 4,330.4880 -39.2850 -0.90%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs