The Problem with Jim Cramer Stock Picks

One of the first stock trading books I ever picked up was Jim Cramer’s Mad Money. I was extremely excited. I mean, here was a Wall Street addict giving his opinions and advice on the market. I was a newbie and wanted to learn, so it seemed like the logical thing to do.

And Cramer gives some very good advice in his book, that really should be common sense. Know Your Goals. Do Your Homework. Set a Target Price.

All very good advice.

But let me tell you the problem with Jim Cramer’s stock picks.

1. You have limited access to Jim Cramer

The segment of his show that makes me cringe the most is when people call in. They get 5 seconds, and half of that is spent saying “Booyah!” Jim doesn’t spend the time with the viewers really looking at a stock and what it’s doing, because his show is not about the viewers. It’s about the ratings. He doesn’t come alongside the trader and fully analyze the stock to determine if it’s playable or not. He gives most of his advice based off of the sector, and oftentimes stocks trade contrary to the overall sector.

Case in point, so far this year the Healthcare sector has performed the best at 34.10% growth. And yet ARNA (Arena Pharmaceuticals), which has a $1.43 billion market valuation, is down 13.07%

2.┬áJim’s plan is hard to follow as a beginner trader

As a beginning trader, particularly if you have a small investment, Jim’s plan is very hard to follow. According to his Mad Money book, you need to have ten different stocks in your portfolio at any given time. This simply is not plausible for a beginner starting with $1000-$5000. There’s not enough money to go around, and any profits you make could easily get eaten alive by broker fees.

Smaller accounts need to focus on 1-2 plays at a time.

3. Jim’s plan is too slow

The tortoise and the hare does not apply here. When you only have $5,000 to start with, you need your account to grow a lot faster than Cramer’s career average of 24%. Let’s think about this for a second. Let’s say you have $5k to start with, but want to earn a living off of your returns. A 24% return would mean you made $1200 on your $5k. That’s not possible to live off of.

You need a better return if you’re going to succeed. (Keep reading to see what it would look like with Tim’s returns).


 

Let me tell you why I recommend trading with Tim Sykes instead.

1. Tim posts videos of live trades

With Tim, you get to watch videos of him as he trades. His library is up to 1000’s of minutes of him trading. You see what indicators he’s looking for, hear his thoughts, and see how he adjusts to price action. You don’t just get a general Buy or Sell, but a real, in depth look at how Tim trades.

If you want to see him trade live, you can sign up to be student of his. Twice a week he hosts a one hour webinar that allows you to trade live with him. With Cramer, you only get to see what happens after the market closes.

You can also email Tim and expect him to respond. He’s very interactive with his followers, so you’ll have a lot better access to him than Cramer.

2. You can earn a lot more, a lot faster

Cramer’s plan is great if you’re managing a $100k+ account. But if you have a smaller account, you have one advantage over the competition and institutional investors- versatility. You can move in and out of trades very quickly. You don’t have to worry about orders getting filled nearly as much as much as the larger investors. You just need to ride the wave.

Cramer’s return average of 24% is great for such a large amount to invest. But Tim’s returns have been far better. In 2014, so far, he’s at a 90% return. Your goal should be to earn more than 24%. Though it’s respectable, with $5000, it’s not enough to live off of.

Previously I showed you that Cramer’s method would only earn you $1200 for the year. If you were trading Tim’s stategy, your $5000 would be at $9500 for 2014, and it’s only the first quarter. Though you may need a little more to live off of, it’s more feasible to do so following Tim’s strategy.

You need bigger returns. By following Tim’s alerts, you can earn more, faster.

3. Tim’s plan is easy to follow for new beginners

Tim is ideal for the beginning trader. By watching his videos, he’ll teach you about level 2, chart patterns, buy and sell signals, and more. Beyond that, he helps you understand the importance of a good broker. His recommendations have revolutionized which vendors I will use moving forward (ie I’ll never use Scottrade again).

As a beginner, there’s a lot for you to learn. Cramer’s stock picks assume you know what you’re doing with your broker. He assumes you can follow his plan whether you’re beginning or advanced.

With Tim, he will bring you alongside him and teach you his exact methods. He will teach the exact chart patterns he looks for, entry and exit points, and tools to analyze your trades.

Comments

  1. says

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