any. certainly not many my house. going lower. >> karen? >> yeah, new three-day rule. the night of the event, day after, second day. that's where i bought some nike today. >> dan? >> more of a crocs guy here. look at baidu. >> all right, thank you for watching "fast." "mad money" "mad money" with jim cramer starts right now. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. i'm not here to make friends. i'm just here to try to help you make some money. my job is not to entertain, but to teach you. call me. there is a gaping hole in the american education system, although i hesitate to it call it a system.

whether you go to high school, they teach you chemistry, gee o tri and physics. you can graduate from college speaking three languages with a deep understanding of quantum physics or ancient philosophy. but you know the one thing they almost never teach you in middle school or high school, say nothing of college, financial literacy. and i'm not talking about economics here. you could be an econ major and still know nothing about financial planning or retirement readiness, let alone investment. money is just not talked about. frankly, it's become the third rail of american education. you're a thousand times more likely to read marx than anything about planning a budget or certainly picking stocks. that's why i'm on a constant mission to teach you how to manage your money, which is what we do every day in the cnbc investing club, providing a constant source of examples. when it comes to managing your money, nothing is more important

than retirement. sooner or later, you're going to stop working, hopefully sooner rather than later unless you really love your job. i'm betting most of you, even if you don't own individual stocks, still have some money in a 401(k) plan. corporate pensions starred going the way of the do do, and now the 401(k) is the main way americans save for retirement. they're offered by your employees and among the greatest tax deferred investment vehicles out there, along with the ira. i'm not talking about the irish republican army. i mean the individual retirement account. for those of you who are about to change the channel because the whole idea of saving for retirement puts you to sleep, hear me out, darn it. you need to know this stuff. your future self will thank you for getting your retirement funds in order. while you may think you know everything you need to know about these tax favored accounts, the truth is there's a lot the so-called experts don't tell you or don't want you to know. for example, the conventional wisdom says you must invest in your 401(k), you'd have to be a

fool not to contribute. many investors advise you to max out your 401(k) contributions every year if you can afford to. right now the maximum contributions are 20 grand with room for 7 grand if you're over 50. it tends to rise gradually over time, usually a little faster than inflation. in 2004 it was $13,000. in 2023 it was 22,500, even with these contributions coming from your pretax income. however, sometimes i think it's the wrong approach. i'm not going to sing the praises of the noble 401(k) plan. 401(k) plans can be a mixed bag. sure they have a couple of really good features. they also have a lot of bad one and those will eat away at your returns. >> boo! >> sometimes through fees that are almost totally hidden from you. i do not like that. so let me lay out the good, bad, and ugly of 401(k) plans, then i'll tell you whether it makes

sense for you to contribute more money to your own 401(k). maybe there's a better way for you to invest for retirement. first the good, the best thing about the 401(k) is it's tax deferred. it's a tax defend investment vehicle. in plain english that means you pay no taxes of what you put in and you never pay capital gains taxes on the profit you put in the 401(k), which allows your gains to compound year after year until you decide to start making withdrawals. regular viewers know i'm a huge believer in the power of compounding. some people call it the eighth wonder of the world. suppose you're 30 years old and you start investing $5,000 in your 401(k). you should be able to generate an average return of say 7% per year, at least historically, and that's being con sesservative. at that pace, you'll be contributing $150,000. that's pretax income to your 401(k) plan. because that money's able to compound year after year without any capital gains taxes, by the time you're 60 those $150,000 of

contributions should be worth over $511,000. without the tax favor status, that number would be roughly $110,000 lower. what a huge break. you only ever pay taxes on your 401(k) money once when you decide to withdraw it. since you're likely to be retired by then, most of you will end up paying a lower rate than what you get hit with if you got taxed on that money while you're still in the work force. that's one huge reason to like the 401(k). the other one, many employers will actually match or partially match your continuericontributi. your employer might throw in $0.50 up to a certain point. that's free money for you. if your employer partially matches your contributions, you should absolutely take advantage of it by putting money in your 401(k). i'm not saying take the money and run, but definitely take the money. your 401(k) doesn't have any kind of employer match.

it's a much less compelling option. 401(k) plans can have a lot of problems. without the match, sometimes you're better off saving for retirement via an individual retirement account or ira, which has the same exact tax favored statuses of 401(k). you can only contribute 6,500 a year to your ira or 7,500 if you're over 50. iras rolled out in 1975, the increase has not kept pace with inflation. if it had, the limit would be more than $8,500. i want it to go to $10,000, and i'm going to make it my mission to fight for you to get that. still, there are ways to better yourself. when you change jobs, you can roll over the money in your 401(k) into an ira, and that's what you should do every time you switch employers or find yourself out of work. what makes an ira a better option. they're the fees. when you invest in a mutual fund, you have to pi the mutual fund's fees. 401(k) administrator will also

charge you its own fees. on average they take more than 2%. i find that extortion. most aptly managed mutual funds charge less than 2%, and they're actively managing your money. if you have looked at your statement and wonder why the heck your 401(k) holdings aren't increasing in value like they should be, these fees are probably the reason. second, 401(k) plans vary widely from company to company. now, some of them give you a terrific range of choices and even let you pick individual stocks, but others are more limited, only give you the choice of a couple dozen different mutual funds. so for those of you who can't pick your own stocks in your 401(k), before you contribute money to your 40 k plan you have to make sure it gives you an option to put your cash in something worth investing in. i spend so much time teaching this in the cnbc investing club because i believe it works. if you can't pick your own stocks in a 401(k), you want a

nice low expense index fund, preferably one that mimics the s&p 500. if your 401(k) doesn't offer that or it charges exorbitant fees gorks with a self-directed ira from a fidelity saying you have control over your money. the bottom line, if the company you work for matches your 401 contributions toe a certain point, take them for all they're worth. other than an ira is the way to go, especially if your 401(k) plan doesn't give you any good investment options. let's go to ian in illinois, ian. >> caller: jimmy chill, how are you doing my friend? >> very strong, how about you, ian? >> caller: glad to hear it. i'm doing well. hey, my goal is to get out of my nine to five as soon as possible and retire. i'm wondering how younger investors should think about the balance between growth stocks versus dividend stocks? >> this is a great question. i believe you should not bet

against yourself. a younger person should be almost entirely in stocks. now, i have been on the extreme on this, but i tell you over the course of the last four years that i've been teaching, that's been the right way to go. let's forget about the bonds until you get to at least the mid-50s, and then start adding them in slowly. you're a stock guy. don't want to bet against your life. let's go to michelle in new hampshire. michelle. >> caller: hey, jim, i could use your advice. >> of course. >> caller: my portfolio was doing fine before inflation, before the interest rate hike, and now it's almost all red, and i just need some tips on how to manage the investments in the down market? >> okay, what we want to do is we want to say that we're going to ride through down markets, and what we do is put cash away regardless. we are not going to look at the day-to-day, month to month or if it comes to retirement, even year to year. yes, we want to have the right stocks. we're not going to stop contributing because historically the rain does go

away. if you only invest when it's good, you're going to end up with not good prices. car washing carl. >> caller: hey, jim, thanks for having me on. >> of course. >> caller: my question is for the novice investor, what tools and methods would you recommend? i mean, obviously besides the obvious p/e ratio, i mean, how do i evaluate companies for a good investment? >> sure. all right, what we do with the investing club -- and i know you can say i'm talking my book, but it's really about exactly that. we show you what the many different ways are to evaluate stocks. and also to pick the ones that are most suitable for you. we can't do that. that's up to you, but we value them, we evaluate them on future earnings, and we also kind of overall value them against other stocks in their same peer group and in the market in general. okay, if the company you work for matches your 401(k) contributions up to a certain point, take them for all their worth.

o other than that, an ira is the superior way to go, especially if your 401(k) plan doesn't give you good options. school's in session, cramerica, today's lesson financial literacy. i'm digging through all my top tips to help develop a strong financial foundation. you're not going to want to miss this one, so stay with cramer. ♪ >> announcer: don't miss a second of "mad money" follow @jim cramer on x. have a question, tweet cramer #madmentiones. send jim an email to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something, head to madmoney.cnbc.com. morikawa on 18. he is really boxed in here. not a good spot. off the comcast business van.

into the vending area. oh, not the fries! where's the ball? anybody see it? oh wait, there it is! back into play and... -oh no, it's in the water. wait a minute. are you kidding me? you got to be kidding me. rolling towards the cup, and it's in the hole! what an impossible shot brought to you by comcast business.

the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower!

i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title. ♪ if everyone in this country lost their minds and decided to

turn america into cramerica, you better believe i would make some changes. so what would the 18th premier of jimmy cramer look like? for those of you who didn't get that reference, google is your best friend. because this is a show about money, let's staick to the mainstream elements of the cramerica regime. we don't really teach our young people how to handle their money. would it be so crazy if you had to take a class on personal finance before you graduate from high school? i think it should be mandatory. like those classes where they show you how to dissect a frog. can i take a moment to speak some words that we all believe but very rarely get to say in polite conversation. money's important, it's really important. and caring about the state of your finances does not make you seem like some sort of monster. say you got a lousy credit score and you want to get married, congratulations. you've just inflicted your horrible credit on your new spouse. neither you nor your partner will be able to qualify for a loan to buy a car or a home, perhaps even get a darn credit

card. these things matter in life. they say money can't buy happiness, but i've found that piece of cliche conventional wisdom to be dubious at best. being broke is a major buzz kill. as i know firsthand from the time i spent living in my '78 ford fairmont 12 months. i wish i had an expert to guide me through this stuff way back then. although i still put money f from -- in my retirement when i was living in my car. what should young people do with their money? first, foremost and always you need to invest. that's the only way you're going to be able to achieve financial freedom, and by freedom i mean living a life where you're not totally dependent on the next paycheck. teaching you how to do this is the reason i created the cnbc investing club. i'm thrilled when i see members of the younger demographic taking an active hand in managing their own money. many people start saving and investing too late and making their lives a lot more difficult than they need to be as they get older.

many young people feel that they have all the time in the world and many more start investing before they're really ready, when they are, in fact, better things for them to do with their money. and that's why i have three lessons and a kaf caveat all th recently out of college. you need to pay off your darn credit card. this is especially true for younger people. banks have gotten aggressive about offering credit to college students. if you're carrying a banks on your credit cards, it's going to eat your returns, and long-term the interest on those credit cards will probably be greater than the profits you can make from investing, at least on a percentage basis. so just pay your darn credit card balance in full. in full each month. automate it with your credit card company if you're worried you'll be tempted not to. that's what i did. when i got out of law school i had max debt on half a dozen credit cards. i took a job at goldman sachs, the firm everyone wanted to work at and i made good money out of the chute, but not enough to pay

that interest and be able to afford the biggest boom box in the world, which was my first pri toirty. i'll never forget how proud i was with that box on my shoulder swinging through the breeze as i worked my way from 46th street to the studio. credit card debt is onerous, even if you're hitting it out of the park with your paycheck as i was. they are the house, they win. you lose. let get to my few lessons for young investors. this advice really is for everyone out there regardless of age or education level, it especially applies to fresh college grads. you need to save money. i recognize not everyone has a predisposition to save. we can't all be natural skeep ch cheapskates. the stock market is a great way to trick yourself into saving a part of your paycheck you might otherwise go spend. investing in stocks can be fun if you take my -- let's say if you join a club, you'll get this. leaving money in a savings

account or certificate of deposit feels totally joyless for many people, even when they're giving you decent interest. if you invest your savings in the market, it will be a lot easier to resist the temptation to spend that money on things you don't need because you'll have to sell your favorite stocks to get your cash back. it's a great way to keep your money in and not out being spent in a way that i don't think is going to ever help. second lesson for young investors, this is a much more targeted piece of advice. while you're still young you can afford to take a lot more risk than a gray beard like myself. when you're in your 20s you can get away with owning more speculative single-digit stocks where the potential upside is huge, but so is the potential downside or you can play with options. i'm fine with that. it's simply because when you make a mistake with your money in your 20s, you have the whole rest of your life to fix it. losing money is less of a problem when you've got 40 odd years in the work force to earn it back.

older investors do need to be more cautious. of course you get through retirement, the more conservative your investment strategy must be. you've got to have some bonds. more higher yielding stocks, utilities. if you're in your 20s, you should invest like a young person, not like an old person. i get too many calls from people, a 40% bond because i'm 22. young people take this advice to heart, especially the recent college grads most likely to invest in the market are the ones who are most responsible, the most prudent about their money. prudent is great when you're putting together a budget to live within your means or deciding how much of your paycheck to save each month, but for young investors being too prudent is actually reckless. 20 somethings, live a little, at least in your stock portfolios. take some risks. play around with some speculative companies. some tiny biotech companies with a lot of potential. even if they blow up on you and go to zero, you've got the whole rest of your life to earn that

money backm. stocks do stop at zero. please have you looked at how low that interest rate is versus say credit card debt? i chose to invest my money when i got out of law school after paying my credit card debt, i still invested knowing that i could beat the stone loan bogey. didn't pay that off in a hurry. so pay some of it off, but please don't be hurried up about it. i'd rather have you invest now and pay later. did plus, the democrats are going to push various student loan forgiveness whenever they're in power. you might end up paying less. final lesson for young investors like i said before the break, it's never too early to start investing for retirement. use your 401 k if your employer will match part of your contributions and especially put some money into a roth ira which is ideal for young investors. here's the bottom line, for young people just out of college, investing is a great way to trick yourself into saving money you might otherwise spend. beyond that, remember, when you're young you can afford to

take a lot more risks with your portfolio, and it's never too soon to start contributing to your 401(k) or ira, especially at ira that's a roth. "mad money" is back. i'm andrea, and this is why i switched to shopify. it gave me so much peace of mind. if we make a change, my site's not going to go down. and just knowing that i have a platform that we can rely on, that is gold to us. start your free trial today.

♪ we live in a world where you have more choices about where to

invest your money than ever before. a virtual infinity of etf, mu mutual funds you name it, but more choices isn't always better. sometimes having more options makes it impossible to decide which ones are right and which ones are wrong. and you've never had more options when it comes to picking these change traded funds and mutual funds than you do right now. they're everywhere. at this point there are so many different kinds of etfs that it can make your head spin. the companies that run these funds, they want your money, and one of the biggest mistakes you can make as an individual investor is to give it to them with a few significant exceptions. unfortunately, this is also one of the most common money mistakes out there, in fact, most people in this country should equate investing with putting their money into mutual funds. some 80 million people or basically half the households in america have exposure to mutual funds. they just give you a menu of mutual funds to choose from, which is a major reason why i generally prefer iras.

i believe in individual stock p picking, which is why i spend so much time teaching you to do it both on this show and my cnbc investing club. we're going to walk you through the whole process in extreme detail every day. what is so bad about mutual funds? if you're investing in mutual funds, you're most likely getting a bad deal. i don't want to paint with too broad a brush here, there are some worthwhile mutual funds, and i'll tell you how to find them in a minute, but first you need to understand the problem with the mutual fund business model that no one talks about. my main beef is with actively managed mutual funds. mutual funds where there are people deciding which securities to buy or sell. unlike hedge funds, mutual fund managers don't get paid for delivering performance. they collect fees from their investors, people like you. the amount of money they make depends entirely on the size of their assets under management. their biggest incentive is not necessarily to give deliver good performance.

what they're really good at is to fund-raise. that's part of the reason in study after study after study, year after year after year, it's been shown that the vast majority of actively managed mutual fund managers underperform their benchmarks. if you invest in an actively managed fund, its performance will probably fall short of the s&p 500. to make matters worse, despite consistently underperforming the market, actively managed muchlds have some of the highest fees in the business. even if your fund does manage to beat its benchmark, the odds are good any outperformance will be eaton up by big management fees and you'll end up with an investment that makes you less money than a cheap index fund that mirrors the s&p 500. much more sink or swim. at even chose not to take them during a year where i was only up a couple percent versus a

strong performance for the averages. yes, i was that ashamed. did a mutual fund manager ever do that for you? you can read all about it in hi tell too much autobiography. here's the part where i say not all actively managed mutual funds are bad. some of them have fabulous managers who deliver terrific results. when a mutual fund delivers great results for a long period of time, if the manager is a decent person, they'll stop accepting new investments. once they get too big, it's impossible to generate the same kind of gains. a lot of these high quality funz are out there, but they don't take more money. if they're not so good, they'll keep taking more money until the performance starts to suffer. when the father of the index fund asked me how i could beat the averages so consistently, i said i limited my investors, i made it like a club and then i was never overwhelmed with new money. bogel praised me. i did love that, and said if

everyone did that, they'd have much better records too. maybe that was the secret to my hedge fund's multiyear outperformance. if you want to know the other secrets to that success, that's what we teach at the investing club. back to actively managed mutual funds. for the most part they're not worth it. the fees are too high, and the evidence that the bulk of them underperform is too staggering. regular viewers know your best strategy is to pair a low fee induction fund with a portfolio of individual stocks you pick yourself. that's what i talk about night after night, preach endlessly to club members. for those of you who don't have the time to research individual companies or if your 401(k) plans don't want you to do it, let me tell you the smart way to invest in mutual funds. you want a cheap, low cost index fund that mirrors the market as a whole, one that mimics the standard & poor's 5 hundreds. with an s&p index fund you've got a vehicle that lets you participate in the strength of the market without having to spend the time picking individual stocks. the whole point of putting your

money in a mutual fund is to save you the time and effort required to manage your own portfolio of stocks. that's why i think it's insane when people start owning multiple mutual funds. by its very nature a fund should be diversidiversified. there's really no reason for home gamers like you to have any exposure to those. if you're going to take the time to try to play individual sectors, that time would be much better spent picking individual stocks. these vehicles are for trading, not investing. i'm not in favor of trading. many etfs rebalance every day. that can take a toll on any kind of long-term performance. you can lose a lot of money even if you're right. there are plenty of exceptions like the gld, which i like. and i like the etfs that mimic the s&p 500. in general if glyou're not a pr you should be very careful about fooling around with most of this stuff. here's the bottom line.

at the end of the day, a cheap s&p 500 index fund is the least bad way to passively manage your money, better than the bulk of massively managed mutual funds. an index fund owns everything, the good, the bad and the ugly. i believe you can beat the performance of an index fund by picking stocks yourself, maybe leaving the bad and ugly out of it. if you don't have the time, stick with the index fund and join the investing club, we will help you do the homework. let's go to eric in tennessee. eric. >> caller: hey, jim, this is eric from park city. my question is in regard to fundamental valuation of a stock. if you could only had access -- if you only had access to four indicators to examine, what four measurements would you choose to look at? >> i would look at sales. i would look at earnings. i would look at margins, i would look at the total adjustable market. i could give you a sense of what

i'd be thinking provided i had historical data ahead of me. let's go to piroz in california. >> hey, jim, just wanted to thank you for your show. it's been a great learning experience for me navigating the markets with you. >> thank you so much. >> caller: i just wanted to -- yeah, you're welcome. really appreciate it. so i just wanted to ask you a question here. i know joe terranova is a huge friend of yours and i'm huge on fundamental and technical analysis. >> good, good. >> caller: and use them both to make any investment decisions, so my question is even though a company is showing strong fundamentals, is it a good idea to incorporate technical analysis as well -- >> always, i think everything should be included, and i'll tell you why. whatever makes decisions and a lot of big fund managers use those decisions and they use technicals, it means that you should include them into your thinking too, even if you think they shouldn't. all available information that is good should go into your

decision-making including technical analysis. all right, an index fund owns everything, the good, the bad, and the ugly. so if you do have the time to do your own homework, i believe you can beat the performance of an index by picking stocks yourself. much more "mad money" ahead, i'm giving you the lowdown on financial security from college all the way to retirement. and later, my colleague jeff marks will join me to answer some of your more burning questions, so stay with cramer. ♪

♪ no matter how good you are at picking stocks, if you don't know what kind of accounts to keep your money in or how to manage your personal finances, or how to get the most bang for your buck when it comes to major lifetime expenses, then you could be missing out on some terrific gains or lose ago fortl losing a fortune to hidden fees. oaf over the course of your lifetime it can help you build up more wealth. and the simple truth is i don't want you leaving the money on the table just because nobody could be bothered to explain it to you, saying the finer points of retirement investing. with that in mind, let me explain whether it makes sense for you to use a regular 401(k) or an ira or you to go with a roth ira, which is a term i'm sure you've heard countless times. i know i've talked endlessly about using the individual

retirement account and the 401(k) to invest for retirement, i don't want to beat a dead horse here, but this is a subject i fete a ton of questions about every day. should i put my money in a roth ira or a regular one. anyone can contribute to as long as they make less than $153,000 a year. i think aside from the earned income tax credit and all the temporary covid stimulus, the roth ira may be the single greatest thing our government has done for low income families since the end of the war on poverty, which ended in a draw with poverty winning on points. if i were the king of the forest, that's going to be a theme of mine for the rest of the year. the industry doesn't seem to care because they make a lot more money off of 401(k) plans. there's no other reason i can find for why you can contribute roughly three times as much money to an ira -- i'm sorry, to a 401(k) as an ira. three times. people put at least 100 -- let's

say, how about this, you put $10,000 in an ira per year, much more in the current cap, and even a little higher than what the contribution limit would have been if you just started these accounts in 1971 and adjusted the initial guidelines. i'm championing $10,000 or bust. i am your friend on this. i told you all about our regular ira lets you take pretax income, invest it, and then your gains can compound year after year, decade after decade totally tax free until you decide to start withdrawing money, and once you retire. a roth ira, that works differently, . with the roth you make contributions using after tax income. putting money into a roth won't decrease your tax bill, at least not upfront. once your money is in a roth ira, you'll never pay taxes on it again as long as your cash remains on the account. you don't pay capital gains tax.

you don't pay dividends tax, when you withdraw it when you can do without penalty, you don't pay any income tax on your withdrawals. basically the roth you pay taxes now so you don't have to pay any income tax 20 or 30 years from now. a roth, you can withdraw the amount you invested and you won't get hit with a 10% penalty, which is what happens when you try to withdraw money from a regular ira before you hit that magic age of 59 1/2. it's different from a regular ira where you don't pay any taxes now and your gains don't get taxed within the account, but once you start withdrawing the number, every pienny you tae out is taxed at ordinary income, which means when you're trying to decide between a roth ira or a 401(k) and a regular ira or a 401(k). you need to determine whether it makes more sense to pay income tax now with a roth or wait until you retire with a regular

account. you'll try to figure out if you'll be in a higher tax bracket or a lower one. this is a docomplicated questio. simply your career, how old you are. my quick rule of thumb, for anyone's marginal tax rate is 22% or less, which is most of america, i think you can go with a roth. better to take the hit upfront than allow your roth ira to compound tax free for the rest of your life. for those of you who don't have the time to pick your own twers diversified portfolio. the smartest thing is to park your retirement in a low cost index fund that mirrors the s&p 500. as you get older, you can add some bonds. until you retire, stocks should make up the lion's share of your retirement investments. i'll keep repeating it until they take me off the air. it's so necessary. it's so contrary to the conventional wisdom. how about a roth 401(k). this one works just like a roth

ira meaning you make contributions with after tax income and you never pay taxes on that money again except because it's a 401(k) plan it has a much higher contribution limit than an ira. there's one other big difference. unlike a roth ira, a roth 401(k) doesn't have any kind of means testing. no matter how much money you earn you can take advantage of a roth 401(k) as long as your employer decides to give you the option. all these decisions fend on when you think the future will look like. if you believe the taxes are headed much higher oafver the course of your lifetime, then a roth 401(k) now where you pay your taxes now, is the way to go. even if you're making a lot of money in the present, at the end of the day. this is beyond our control and beyond our ability to predict. the bottom line, the lower your present income, then the lower your tax rate. a roth 401(k) or a roth ira lets you pay those low rates now and never worry about taxes again. the less money you make, the

more likely that a roth is for you. it's that simple, and when you're saving for retirement, don't worry about what could go catastrophically wrong 30 or 40 years in the future. just worry about making the best choices right now. "mad money" is back after the break. ♪ i am, i cried ♪ [ laughing ] ♪ i am, said i ♪ ♪ and i am lost and i can't ♪ punch buggy red. ♪ even say why ♪ ♪ i am, i said ♪ ♪ ♪

okay, team! oh, thank you so much i couldn't have done it without you. honestly, i don't do a whole lot here. i'm really just here for the at&t internet, it's super-fast so, any pre-launch concerns? what if nobody buys them? that's mean or, what if everybody buys them? oh, i hadn't thought of that that's probably not gonna happen can we handle that kind of traffic? the network can handle it! i downloaded eight hours of true crime stories just during our last video call i'm learning a lot [crowd chanting]

but it's not the critic who counts. with every swing and block, your game plan never changed. ♪♪ some still call it luck. let them. because you know what it's always been. inevitable. ♪♪ ♪♪ lately we've heard a lot about the crushing burden of student loans, and what the government should or shouldn't do to make some of that burden go away. we lived through a years' long moratorium on repayments during the pandemic which helped

supercharge the economy. kids who great with no debt end up being worth a lot more money than their classmates who have outstanding student loan balances. student debt is cheaper than credit card debt. don't sweat the program too much. the problem is simply there's so darn much of it, and you can't get rid of it in bankruptcy. so for any of you who are parents or thinking of becoming parents, there are very few things you can to for your kids' future that are better than paying for as much as their college education as you can af afford. of course if i were to make a hierarchy of needs, i'd tell you it's more pimportant to save an invest for retirement. if you don't have that retirement money, who do you think is going to support you? the kids? you ever want grandchildren, you'll need a retirement fund. otherwise your children will spend ages taking care of you

instead. after you save enough for retirement in a given year, then it's time to start thinking about college, even if your kids only a toddler. the best way to save for college hands down is through a 529 plan. these plans vary by state. the general rules apply across the country. now, there's two kinds of 529 plans. first some states let you use a 529 as a hedge, a way to hedge against tuition inflation. you can buy college tuition credits at today's prices and use them in the future. that's not what i'm talking about, especially not in a world where major national politicians are talking about making tuition free at public universities. i want you to use a 529 savings plan. these are run by states, but generally speaking a 529 doesn't let you manage your own portfolio. you have to pick between a mix of different mutual funds. this is not my favorite way to do things. i prefer you to have control over your assets, but 529s have so much going for them that i'm

willing to swallow this one flaw. remember, when you can only choose between funds, go for a low cost fund that mirrors the market, like an s&p 500 index fund, so what are the rules for a 529 plan? let's say you've just had your first child. congratulations. if you can afford it, you should start a 529 with your kids as the beneficiary right then and there. that's what i did. well, maybe wait a couple of days. after all, you just had a baby. anyone who's read confessions of a street, i traded big blocks -- the trades worked out financially, didn't really help things at home. here's how a 529 works. the contributions are not tax deductible. you've paying for this with after tax income. once your money's in the 529 plan, you don't pay any taxes on your gains, so they can compound tax free year after year, which is what i like so much. it's a lot like an ira, except for college and retietirement.

you can contribute 17,000 a year if you're sinlgle or 34,000 if you're married, and you file your taxes jointly. that is a heck of a lot of money. by the way, your kids' grandparents can contribute to the same 529 plan too. if you don't have the money, a grandparent can also start a 529 with your kid as the beneficiary. for financial aid reasons, it's better to have a parent to do it. now, let's say for some reason you or your parents are sitting on a really huge sum of money. one of the cool things about a 529 plan is that you can front load five years worth of contributions without incurring the federal gift tax, as long as you don't write any checks to the plan's beneficiaries over the next five years, which is not hard because who writes checks to a 7-year-old. in other words a single parent or grandparent could potentially invest $85,000 into a 529 plan right from the start, or if you're married and filing jointly, you could contribute

$170,000. for the next five years after this, you won't be able to contribute anything without getting hit by the gift tax. once you've dropped that kind of money, you won't need to make that many more contributions. you want to get that money into your kids' 529 as early as possible. that's because the greatest of these plans is all about the power of compounding. given that you don't pay taxes within the 529, if you can somehow contrive to contribute $85,000 right off the bat and inf invest that money in a low cost index fund, over time you'll make an average of roughly 8% per year. by the time your newborn is 18, you should have tripled your money, 85 grand turns into 340 grand? that's enough for an expensive private college education and a decent chuck of law school to boost. i know most people can't front load a 529 plan like this, if you can front load, it's the best strategy.

for grandparents, your 529 contributions won't count towards your estate tax. to borrow a line from the life of brian, always look on the bright side of death. last thing about saving for college and grad school, any money in a 529 plan that you don't use you can transfer to another relative. we're talking siblings, parents, even first cousins. if you save all this money and your ungrateful kid decides not to go to college, you can just withdraw the money from your 529 plan. you'll have to pay taxes on any of your gains along with a 10% penalty. >> boo. >> here's the bottom line. paying for your kids' college education isn't as important as providing for yourself in retirement, at least not financially, but if you have children then after you've made enough retirement contributions for the year, putting money in a 529 college saving plan should be the next item on your agenda. stick with cramer.

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i always say my favorite part of the show is answering questions directly from you. tonight i bring in jeff marks, my portfolio manager, partner in crime to help me answer your burning questions. for those of you who are part of the investing club, jeff will need no introduction. for those of you who aren't members, i hope you -- you got to join already. i would say jeff's insights and our back and forth help me to a great job for all "mad money" viewers, and i think in some ways more important, members of the club, if you like this be sure to join the club. what's really interesting is that he and i go at it every day, and we don't agree. if we fagreed, what would be th point. first up we're taking questions from gregory in california. hi, jim, i started investing club two months ago. you have my attention now. thank you. is there an objective way to determine intrinsic value. if so, where is clear information on the subject?

this is something you and i may disagree on. i am more -- or you are more science. when i think about a company that has intrinsic value, i often think about can we do without it? how special is it? what's the total addressable market? do i value the market cap as equal to the opportunity, that's a very -- my own way to look at it. you on the other hand, i think are far more slanalytic and precise. >> there's more than one way to skin a cat. one way you could do it is look at the price to earnings multiple of that company versus some of its peers, then compare things like revenue growth, gross margins, free cash flow and stack themp one against one another, and that could be a way to determine if a stock is cheap or expensive versus the group. >> totally. i think when i look at companies and i say that i want to emphasize let's say an eli lilly over a bristol, i look at the fact that the growth rate makes it so that i'm not as worried about the price to earnings

ratio. then i got you bringing me to back to earth to remind me that the price could go sky high and create problems and we are in the end a trust, and we must do what's right. next we have robert in new york who asks, hi, jim, i don't want to sound like a pig but if i'm planning to hold a stock for the long-term, why should i take profits in a company when i know there's an excellent chance the stock will continue to rise? here's why, you can't become the company. when i look at an eli lilly, which i think has got the biggest pharmaceutical -- i mentioned it twice now, i'm sorry, but it's on my mind, we could easily become the eli lilly fund because it becomes dominant. we could become the apple fund, so what we try to do at all times is make it so that we do not swing from one company and that's what makes us feel like you've got to do some trimming. >> yeah, i think there's also a difference too between trimming versus selling. if we've learned anything from 2022, it's that even the best companies in the world with the best products, great balance

sheet management, no one was immune to a significant pullback, so if you can avoid something like that, then it favors trimming even if it's such a great company. >> jeff, perfectly put. now i'd like to say there's always a bull market somewhere, and i promise to try to find it just for you right here on right now on "last call," president biden said to address the nation in the hour, but likely about the supreme court ruling, not what you might think that we will take you there live. treatment breaking, moments ago, barry dillard scoring a deal for paramount, the company he used to run. the reporter that broke the story will be here. treatment tesla's shares, and all it took was a alibi elon musk. we will tell you who he followed that moved the stock and sadly it was not me. all of that over the hour. belly up for