Do you have to sell that S&P index fund? Are you in danger of losing a ton of money if you stick with it? Would you do better if you stopped putting money into it and instead tried to mimic the Nasdaq?

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Yes, yes and yes.

Sorry to be so noncryptic, but I don't see the S&P turning around anytime soon. Index funds had been the way of the world for so long that it is hard for many people to believe that they have any risk.

Wrong!

These funds have a ton of risk. In fact, they represent an index that became progressively overvalued year after year because of the self-fulfilling prophecy of indexing's own success. People began to simply check off S&P 500 for their 401(k) plans, and indexing became the de facto way to buy stocks.

Last year, we saw the beginning of a trend away from indexing, as active portfolio managers started beating the indices and the S&P started languishing. Lately I have been struck by the tax efficiencies and convenience of unit trusts as a better way to invest for the long term.

Rather than just knee-jerkily putting more and more money into an index that no longer represents the best and the brightest, how about examining some of these

Merrill Lynch

HOLDRs that

Dagen McDowell

has

written so eloquently about. I know if there were a HOLDR for the

Red Hots, I would be much more interested in buying that unit trust than I would buying more S&P 500 exposure.

Check those out before you blindly send those additional funds into an index pool. They may represent a better deal.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Merrill Lynch. Cramer's fund also may be long or short certain stocks in his biotech or B2B rotisserie leagues or TheStreet.com New Tech 30 index. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.