By convincing average investors that they can use their retirement money or savings to trade stocks, Cramer does serious harm. As this great Barron's article demonstrates, Cramer is an awful stock picker. What is the lesson learned? It is extremely difficult for even the most talented money managers to beat the market. Besides, Cramer is not even that talented. Average investors are better off investing in a low cost index fund. Cramer may be entertaining, but he is dangerous.According to Barron's:
Cramer's recommendations underperform the market by most measures. From May to December of last year, for example, the market lost about 30%. Heeding Cramer's Buys and Sells would have added another five percentage points to that loss, according to our latest tally.
To his credit, Cramer's Sells "made money" by outperforming the market on the downside by as much as five percentage points (depending on the holding period and benchmark). His Buys, however, lost up to 10 percentage points more than the market.
These batting averages represent his stock-picking over a stretch of time, but Cramer is wildly inconsistent, and the performance of individual picks varies widely. So widely, in fact, that it is impossible to know with confidence that any sample of Cramer's recommendations will enable you to outperform the market.
These facts don't mean that viewers should avoid his informative and entertaining show - they should just be wary of his stock picks.
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