carter. >> i want to play the commodity track. i think that's the best way you can do it. visa also. but -- >> put spreads, visa. >> xlv. >> our time has expired. i'm melissa lee, thank you forw. see you back here next friday. meantime, "mad money" 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. other people want to make friends. i'm just trying to save you some money. my job is not just to entertain but to educate and teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. every night i come out here for two big reasons. the first is obviously i like the attention. but the second and more important reason is that i want to help you build and preserve

your wealth. we live in a world where it's increasingly difficult to become rich if you weren't born that way. and love it or hate it, i believe that the stock market is the best ladder we have in this country for social mobility. there are millions upon millions of people in this country, but there simply aren't that many jobs that pay you a salary fat enough to actually make you rich, even if you're a total cheap skate and save nearly every single penny you earn. the truth is if you want to become really wealthy in this country, unless you're born with a silver spoon in your mouth, that means planning your financial strategy for an entire lifetime. even if you don't have a high paying job, as long as you can save a decent chunk of your paycheck and invest it wisely year after year, you can make your wealth grow to the point where you become if not filthy rich, at least -- at the very least, financially independent. meaning you don't need to worry about your job security or where your next paycheck is going to come from, and you'll be able to retire easily without the need to rely on social security, which for all we know, might not even be around when some of our

younger viewers hit retirement age. that's why tonight, tonight i want to help you figure out the best way to manage your money in order to help achieve real f financial independence. but we need to talk about the consent of generational investing because the kind of strategies that make sense when you're young and in your 20s are very different from the sort of things you should be doing when your middle age or a senior citizen for that matter. we don't talk enough about that on "mad money." tonight's different. but there's one constant when it comes to managing your finances no matter how old you are. that's the fact you will never get a better opportunity to make your money work for you than by investing in the stock market. even when we're in a bear market, when the action is treacherous and volatile and it feels like stocks go down every single day, when you take a long-term view, it's easy to see the stock market is by far the most effective method of wealth creation out there.

sure, it might go down for weeks, for months, even years. it might crash like it does upon occasion. but if you take the long view, the very long view, stocks tend to go higher. and i don't say that as some sort of pollyanna. when i got started in the business in the early 1980s, the dow jones industrial average was trading in the 800s. despite multiple bear markets between then and now, the dow currently stands what you might call well above that mark, right? that represents a pretty fantastic amount of wealth creation. and that's why i'm so adamant that no matter how ould you are no matter how wealthy, you really should have some of your money stocked away in this, the stock market. for those of you who are concerned that the market is rigged, that it's dangerous, that it's too unreliable or unsafe a place to trust your savings, can i give you some historical perspective right now? if you go all wait back to 1928,

that's right, before the great stock market crash that preceded the great depression, through the end of 2014, the average annual return for the s&p 500, including dividends, is about 10%. show me an asset class with a better average return. you can't do it. stocks aren't just the best game in town. they're the only game in town if your goal is to grow your wealth. now, for some of you who want to get rich quick rather than get rich carefully, that 10% annual average return for the s&p 500, it may not seem like such an impressive number. you're wrong. you're just wrong. forget the fact that it's more than double what you can expect from a 30-year treasury or certificates of deposit. they earn you next to nothing. let's examine that 10% figure in absolute terms. when you're taking a long term view, meaning planning for your entire lifetime, racking up a

10% return from a simp inexpensive s&p 500 index fund, which you know i prefer, starts to seem pretty darn impressive. the market is going to have its up years and down years, but over a long enough time frame, that 10% figure including dividends has held pretty steady. but to really understand the value of an asset class that gives you a 10% return, you need to view this number through the lens of what's known as compound interest. sometimes i'll talk about this as the magic of compounding. think of it like this. if you invest $100 in the s&p 500 and it gains 10% in the first year, then you've got $110. after another year of 10% gains, you've got $121. a third year of the same gives you $133. the gains keep getting larger and larger because each year you're making additional money off the previous year's profits. eventually with a 10% average return, you'll double your money in roughly seven years. now, for those of whou are really young, right out of college, waiting seven years to

double your money, i know. it seems like an eternity. and, listen, i've got more risky ways of growing your capital faster if you stay tuned. however, the truth is that as you get older an investment that can pretty consistently, you know, take your money up in seven years' time and double it, well, i'll tell you it just becomes pretty incredible. that said, the imagine of compounding works best the younger you are. that means you have more time for your money to grow. yet sadly young people are the least likely to be impressed by that kind of steady capital appreciation. that's why acclaimed economist george bernard shaw famously said youth is wasted on the young. let me do my best to make these numbers sound more impressive. i'm going to walk you through it. suppose you're 22 years old, and you're just entering the workforce. you've got more than 40 years before you're expected to retire. so let's say you invest $10,000 in an s&p 500 index fund right now. let's also suppose that the next 40 years aren't too different from the last 40 years.

in that case, if the average return from the s&p 500 holds steady at around 10%, then in four decades, your $10,000 investment will turn out to be worth more than $450,000. that's enough to send multiple children through college, grad school, buy a nice house in most parts of the country, pay for a huge chunk of a pretty ritzy retirement, and that monster multiyear gain, it didn't require any kind of stock picking. it doesn't require you to do trade or time the market or even do any sort of research into individual companies, which i know is hard for most of you. you just need to invest your money in a low-cost s&p 500 index fund or etf, and then you wait. granted, you're waiting 40 years. but $450,000 when you're approaching the age many people retire, that seems a lot more

valuable than the initial $10,000 investment you made when you were young and had your entire work life ahead of you to make money the regular way. so please, i'm begging you, think of it like this. a little money saved and passively invested in the stock market is the easiest way possible when you're young to turn -- it can turn into a massive fortune when you're old and have all sorts of additional costs and responsibilities. and all you have to do after you initially save that money is let it sit on the sidelines. ideally in a 401 krk plan or ira so that you don't have to pay capital gains or dividend taxes. the same logic if you're 30 or 40 or even 50. but you get a lot more bang for your buck if you start younger, which brings me to the bottom line. even if you don't have time to do homework, the stock market is still the best tool out there for growing your wealth and thanks to the magic of compounding, the earlier in your life you start investing in the market, the bigger your

long-term capital gains can be. and of course, it's not just capital gains but also dividends. everything gets reinvested. let's go to brenton in new mexico, brenton. >> caller: jim cramer, big booyah from the land of enchantment. how are you, sir? >> i am good. how about you? >> caller: i'm doing fine, thank you. hey, general question. mutual funds and index funds claim minimizing single stock risk. >> right. >> caller: but inherently, though, isn't it fair to say that mutual funds and index funds have other risk that you would avoid with a single stock portfolio? >> absolutely. and i think that that's why i always suggest that there be two portfolios. there should be that capital preservation and appreciation fund. we put that aside for retirement, and that should be in a diversified fund. i prefer it to be in an index fund. and the rest should be mad

money. i sliver of it, though. mad money, we pick individual stocks. that's why we call the show "mad money." i don't want the bulk of your portfolio in individual stocks. there's too much single stock risk. but i want you to be able to pick stocks, and i know you want to do it or you wouldn't be watching the show. brian in oklahoma, brian. >> caller: thanks for having me. first time investor. how do you value a company's -- one company versus another, measure of their value? >> well, we spend a lot of time in get rich carefully talking about that. what you're really trying to do is measure the future earnings stream. if you can measure the future earnings stream, you can figure out what you'll pay for that earnings stream now. what really matters is that if you take a longer-term view, you can get a feel for what that stock might be able to give you for dwebd dividends and capital gains. dividends tend to be for more preservation, and then the capital gains is for the appreciation stream. i want you to have a little bit of both, but you've got to be

thinking about what a company can earn in the future. that's what dictates stock prices. this show is about helping you build and preserve your wealth, and the stock market is the best tool out there to do that. a lot more "mad money" ahead, including the four-letter word of the investing world. what it is and why the conventional wisdom about it is all wrong. plus i'm not pulling any punches here. what you absolutely must not be doing in your retirement account. and i'm unveiling the rules you need to navigate in a bear market. so stay with cramer! >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.

tonight we're talking generational investing, meaning how to handle your finances depending on whether you're old or young or somewhere in between. as much as many of us might not

want to admit it, the rules in this game can be totally different depending on what age you are. nobody would suggest that a retiree poor all of his or her money into high risk speculative stocks that could either have enormous upside potential or go all the way to zero and absolutely wreck your portfolio. but just because some of this may sound straightforward doesn't necessarily mean that it's obvious or standard, which is why i'm taking the time to go over the really important differences depending on where you are in your life cycle. now, i always tell you you need to have two discreet piles of cash, your retirement portfolio which is more conservative and should be invested through tax favored vehicles, and your discretionary mad money portfolio, hence where the name comes from, where you can start taking a few more risks with your money once you've already topped out your retirement fund. no matter how old you are, retirement objectives must always come first. i love to play with the discretionary mad money side of things, but the truth is that a

bet on your retirement is a bet on your own longevity. you want to live for a long time, and you shouldn't have to work your fingers to the bone. that means planning for retirement from the moment you get your first paycheck. regular viewers know my rules. no matter who you are, the first $10,000 you invest in the market should go straight into a low-cost index fund or etf, that mirrors the s&p 500. index funds are a fabulous way to get exposure to the stock market's gains without putting in the kind of time or effort that's necessary like what we do around here, picking individual stocks. if you don't have the time or inclination to pick individual stocks, then all of your stock market exposure can come via the index fund that mirrors the s&p 500. i'm fine with that. there's no reason this needs to be incredibly complicated. but like i mentioned earlier, it's very important that you get yourself some exposure to the market because no other asset class can grow your wealth the way equities do. once you save more than $10,000, that means you have enough money to start a diversified portfolio

of five stocks. remember, anything less than five stocks in five distinct sectors, you aren't really diversified. you take that money and invest it in individual companies for your retirement portfolio. it's only once you've saved a large enough amount of money for retirement, once you've maxed out on all the benefits of your ira and 401(k) that we start talking about that discretionary portfolio where you can afford to take more risks. a lot of people feel all i want you to be is in individual stocks. that's just wrong. index funds and then individual stocks. now, when you're younger, your retirement portfolio and discretionary portfolio might not look all that different. younger investors can afford to take all sorts of risks with their money that we old guys simply can't. that's true for a host of reasons. when you're still in your 20s or in your 30s, if you invest in something risky and it crushes your portfolio, you've still got a lot of time to make the money back. you've lost your whole working life basically. you've got years and years and years of paychecks.

however, if you're pushing or approaching retirement and you lose a fortune in the stock market, that's a real problem and you're going to have very little time to fix it, which brings me to my first rule of generational investing. not only can younger people afford to take risks with their money that older folks can't, but for those of you in the younger demographic, it's imperative that you take those risks. now, you shouldn't go crazy and speculate with all of your savings. that retirement portfolio is off limits. but you should absolutely devote some part of your discretionary mad money portfolio to betting on these high-risk long shots. i know i'm out there saying this stuff, but i believe in this. i'm talking about smaller, less well known companies with massive upside potential coupled with enormous down side risk of things go wrong. remember, this is for the younger cohort. the classic expects here are the development stage biotech stocks, which can fly through the roof if they get a big drug approval or even just a piece of positive data on a drug that's years away from hitting the market. of course by the same token, these smaller biotechs, they

will get slammed if there's any negative news, and their stocks can be very difficult to own in more negative markets because they don't have any kind of dividend protection or even earnings protection. however, we're talking about long term investing here, looking for good opportunities that can work regardless of whether we're in a bull or bear market. there are plenty of speculative companies that have nothing to do with the drug business. why do i insist that younger investors speculate, take risks that might scare older people? because the gains here could be absolutely stunning. and it would be down right foolish to pass up the opportunity to own the winners even if it means picking some losers along the way. when you're in your 20s and 30s, you should be investing like a young person, not like an old man. that means taking at least a few kinds of risks. let me give you an example that sheds light on the situation. when "mad money" initially came on the air back in 2005, our very first ceo interview was with a tiny biotech company called regeneron. at the time, regeneron was a

biotech that had been kicking around for 17 years. 17 years without ever really developing anything noteworthy that could move the needle. since then, though, this company has become a powerhouse. with the stock taking off into the stratosphere based on the surprising strength of a macular degeneration formula and continuing to roar on a number of other break through therapies. fast forward ten years to the summer of 2015, and regeneron stock had traded all the way up to $592 before getting slammed by a market wide selloff. but for the sake of using round numbers in this example, let's just call it 500 bucks. ten years ago, could have bought regeneron for speculation, five bucks, what would happen with that 500 bucks for buying it at five? how about this? a gain of roughly 9,900%. not a double, not a triple, not a quadruple. no, regeneron is a ten-bagger.

but you never could have gotten in on that gigantic gain if you hadn't taken a little risk in 2005 and bought a company with no profits, no products on the market, and only the promises of the ceo that things would work out. of course regeneron worked out in a major way, but many similar small cap biotechs have done nothing or lost you enormous sums over a short period of time or longer periods. some of them have been kicking around. you won't always be able to identify who is a winner in this kind of space. that's okay as long as you cast a wide net, speculate using a basket. if you've taken small positions in ten of these biotechs, i would say nine of them are going to zero. as long as the tenth one was regeneron, you still would have made a monster gain. this should only be one small part of your diversified mad money portfolio, but it absolutely belongs there because the risk/reward of trying to find these speculative winners absolutely makes sense when you're young. for older investors, though, speculation is a much more risky game, and i'd only recommend playing it with excess cash that you absolutely can afford to lose.

here's the bottom line. remember to speculate while you're still young enough to be able to take the hit if something goes wrong. as long as you're disciplines and it only makes a small part of your discretionary portfolio, then it's absolutely worth hunting for the next regeneron without hesitation. much more mad ahead. i've got the answer to the question on the top of investors minds. stocks or bonds? the age old wisdom you've heard is wrong, and i'm about to rewrite the script. plus the game plan you need to follow when the bear market strikes, and it's the most important piece of advice about financial health i could ever give you. many of you will have to take action tomorrow. don't miss this. stick with cramer.

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it's time to address a major issue that i have to admit i don't spend enough time discussing here on "mad money." i'm talking about the question of stocks versus bonds. now, there's a good reason why you don't hear me recommending that you invest in bonds very often. it's not just because this show is about stocks. the fact is ever since the great recession, interest rates have been held down to incredibly low levels, and therefore bond yields like the return you get from owning say u.s. treasuries

have been absolutely paltry both by historical standards and versus what you can get from safe dividend-paying stocks. in general, for the last few years, even when the stock market has been getting absolutely pounded, bonds simply haven't represented very good values versus equities. that's why i've so often castigated you about the idea that excessive prudence can be the most reckless strategy of all because if you invest too much of your money in safe, virtually risk-free u.s. treasury bonds, you've basically been insuring you'll get a very low return on your investment for many years to come. all in all, if you want to grow your capital, and after all that's what investing is supposed to be about -- then like i've said before, stocks are still really the only game in town, even after -- what can i say -- so many years. however, i don't want to make it sound like i'm pooh-poohing bonds altogether.

there's absolutely a place for bonds in your portfolio. it's an essential place, especially as you get older. here's the crux of the issue. even though i believe that stocks are the best way for you to grow your capital over the long term, even in moments when u.s. treasury yields are at historically low levels, at the end of the day, stock investing and bond investing are about two entirely different things. stocks are the tool you use for capital appreciation, meaning turning your money into more money. but bonds are all about capital preservation. they protect your money and give you a nice and steady albeit small return that's still big enough to offset the impact of inflation for the most part. you invest in stocks so that you can risk your wealth you have to generate even greater wealth. that's what it is. you invest in bonds to protect whatever part of your wealth you simply can't afford to lose. there it is. which brings me to the generational investing aspect of this question. depending on how old you are, there's a huge difference in how you should approach the very idea of putting your money into bonds. when you're young, investing is all about taking risk so you can

get better returns. i've always explained how people in their 20s and 30s can get away with that attitude because you've got the rest of your working life to make back any potential losses. but as you get older, you'll have more and more wealth that you simply can't afford to lose it, especially in your retirement accounts. now, bonds are a staple of saving for retirement because u.s. treasuries are the closest thing to a risk free investment out there. most financial experts will tell you you need to earn a lot more bonds a lot earlier in your lifetime than i think is necessary. you'll never get risk in treasuries. their lower term simply don't improve much in the way of capital appreciation. let's say for the sake of this example, let say 30 year treasury bonds are yielding 3.5%. that is much higher than the 2.5% to 3.25% range we saw in the first nine months of 2015. with that 3.5% yield, as long as you reinvest your coupon payments back into treasuries, you might double your money in

20 years. remember, the average historical return for the s&p 500, the benchmark for u.s. stocks, is 10% annually, which will let you double your money in a little more than seven years. so if you're under the age of 35 and you own a bunch of bonds, with the idea that they'll slowly but steadily make you money, see, i think you're being way to cautious. i know it puts me out there. but you know what? i've been around. that's how i feel. even in your 401(k) and your i.r.a., you want to be heavily weighted towards stocks while you're young. allowing your gains to compound tax-free year after year after year. i told you how great compounding is. but as you get older, owning treasuries, especially in your retirement fund, becomes absolutely essential because unlike the stock market where you can lose enormous amounts of money in the blink of an eye, bonds really are safe. once you've used the stock market to make yourself financially independent, you do want to follow more of your money into u.s. treasuries where you know your investment won't

somehow vanish overnight. ideally you do that by putting your cash in a cheap bond fund. so let's get down to brass tacks. precisely how much of your retirement portfolio should you keep in bonds versus stocks? again, that depends on how old you are. i'm going to give you my rule of thumb, though. i don't think your retirement fund should have any bond exposure whatsoever until you turn 30. if you own bonds at the age of 25, you're wasting your youth. it's better to put your capital to work in the stock market where it can actually grow. in your 30s, i'm going to let you keep 10% of your retirement fund in bonds or 20% if you're on the conservative side. once you're in your 40s, i think you can go up to 20% to 30% bonds. in your 50s, i say 30% to 40%. and in your 60s, as you approach retirement age, take it up to 40% to 50%. that's right, 40% to 50% bonds. even after you retire, i still think you should keep a substantial chunk of your portfolio in the stock market.

post-retirement, my recommendation is that you increase your bond exposure to 60% to 70% because once you stop working, you really can't afford to take too many losses with your investments. especially since you're going to need to start spending the money in your retirement accounts. but that said, i still think keeping roughly a third of your money in stocks makes sense even for a retiree. that's because you're going to be living off your investments for the rest of your life. so some part of your portfolio should always be trying to create more wealth in case you live longer than you expect and need more money to support yourself. in other words, going all in on bonds once you've retired is a bet against your own longevity. who the heck wants to take that kind of bet? here's the bottom line. for younger investors, putting your money in bonds is a fool's game. but as you get older, you should gradually increase your retirement funds bond exposure to the point where 40% to 50% of your money is in u.s. treasuries by the time you're in your 60s because that part of your wealth will then be protected against the volatility of the stock

market. but even after you retire, you should keep owning some stocks so some piece of your capital can continue to appreciate over the long term. best case? you live a very long time, and that extra money, it comes in handy. let's take some questions. how about nasir in pennsylvania, nasir? >> caller: booyah, jim. >> how are you? >> caller: i'm good. big fan of the show. thank you for taking my call. i love your book, get rich carefully. >> thank you. >> caller: i'm looking for advice today on how to determine an entry place for a stock, especially if i'm looking to start a core position given how important cost basis averaging is. >> i think this is a great question. the reason why it's a great question is that a lot of people feel like they want to draw a line in the sand. they want to make what i call a statement buy, or they just want to be in a position where they kind of got rid of it. they bought, and they put it away. that's why i say take into account human frailty. the most i ever like to buy at one point is half of my position.

i prefer to buy a quarter. if the stock goes higher, well what a terrible high-quality problem. if it goes lower, you got room to buy. i like to buy in stages. in all my books i talk about stage buying because i don't want to be overconfident. don't you be overconfident. do it in stages. brian in new york, brian. >> caller: hey, jim. how are you? >> i'm fine. how are you doing? >> caller: i have a 401(k) plan from a previous employer, and i'm trying to decide whether to put it in an annuity managed by an insurance company or if i should just put it in a traditional i.r.a. >> i want you to run it yourself. i mean you watch the show. i think you can do it yourself. the annuities have fees. now, look, i'm not against anything that makes it so that people can build wealth. but my experience has been that a lot of annuities have fees that eat things up. maybe there's some that don't. but i believe in self-directed investing. when it comes for that. if you have to, you can put it in an index fund if you don't have time. but i do like to take control of

my investments. an i.r.a. lets you do that. investing in stocks and bonds are two very different things. as you get older, you can gradually add exposure to bonds. but young investors, you just don't belong in bonds. much more "mad money" ahead including the playbook for when a bear market takes a biets of your money. plus if you want to ensure a strong retirement, you're going to want to listen to my advice and take action tomorrow morning. don't miss it. and i'm answering the questions you've been sending me on twitter. so why don't you stay with cramer!

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tonight rather than focusing on the day to day vis sis tuds of stock market, i want to help you take a longer view, plan out how you can invest for a lifetime. that makes a much longer time horizon than we discuss on "mad money," and when i say longer, i'm talking about taking a 20, 30, 40, or even a 50-year view. there's no such thing as a stock you can buy and hold for the next decade or two. i wish it were that easy. it's not. regular viewers know my mantra. it's buy and homework, not buy and hollywood. no matter how confident you are, you immediate to keep checking up on companies, make sure nothing's gone wrong with the story. however just because you can't pick a few stocks and ignore them, it doesn't mean it's impossible to take a long view. you simply need to zoom out a bit. when you start examining stocks over a multidecade time horizon, one things becomes redly apparent. if you know what you're doing, a bear market can simply be a different kind of opportunity.

that's right. when stocks are getting slammed, when they're getting hit everywhere you look, when it seems like the losses will be endless, when the shares of individual companiecompanies, y to recognize you could be getting a terrific opportunity to pick up some high-quality stocks for the long run into the weakness. now, understand i'm not giving you license to buy stocks indiscriticism natally into any kind of dip. what i am saying is when you're faced with a bear market, meaning when the averages are down by 10% from their highs and they seem like they could go even lower, then it probably makes sense to start buying most stocks instead of selling them as long as you're willing to take some short term pain for long term gain. whenever you buy during a bear market, you need to be careful. you never buy a position all at once. that's pure arrogance. you're just asking yourself to look like a moron if that stock

keeps going lower. inste instead, in a bear market, you probably want to use even wider scales, meaning after you make a purchase, you got to wake for that stock to go down pretty meaningfully and substantially before you buy more. i need you to think longer term. something we didn't do at the beginning of the show, but we're way past that now, aren't we? you don't believe me? just look at this chart of the s&p 500 over the ten years starting in the fall of 2005. look at those hideous declines during the financial crisis in 2008, 2009. if you used that weakness to very gradually build a position in a cheap s&p 500 mutual fund on the way down, then within a couple of years, you made a killing. or how about that nasty bear of 2011? we snapped back from those losses even more rapidly. by the way, this is why warren buffett always seems so sanguine when the market's getting crushed. he has enough money that he can afford to take any level of

short term pain in order to get his hands on some long term gains. don't get me wrong. if you have a shorter time horizon, if you're a hedge fund manager who needs to be up for the year or for the day for all that matter because investors will flee your business, then you cannot afford to approach a bear market as a long term buying opportunity. if a hedge fund manager keeps buying gradually into weakness, you'll lose enough money in a short enough period of time that the fund will likely go under. go read confessions of a street addict. but the vast majority of you are not running hedge funds. you don't need to make money every day or even month or year. what you need is a long term strategy to let you rake in massive multiyear gains over the rest of your lifetime so that you have enough money to retire comfortableably, send your kids to college. that means you don't need to be so concerned with short term performance. this is not an excuse to hang on to loser stocks of loser companies simply because you hope that one day eventually they'll turn around. my point is that the ugliest most vicious markets that send everything down, the good with the bad, they will always create

opportunities for smart investors as long as you're patient enough to take advantage of them slowly because if you pounce too quickly, you'll end up buying way too close to the top. the other caveat, if you're not simply playing with an s&p 500 index fund, then you have to be careful about what stocks you pick during a bear market. you need to do the homework, make sure you own the stocks of companies that are actually doing well, have good balance sheets, or at least companies that are doing okay but could do better in a stronger environment. during a bear market, you must not buy the stocks that are right in the blast radius that are causing the decline. you don't want to own the companies that are causing the weakness. instead, you should search for collateral damage stocks that are going down simply because everything is being taken lower by the s&p 500 futures and the etfs that crush entire sectors. and if you own anything in the blast zone, please don't hesitate to -- >> sell, sell, sell. >> and swap into something

that's safer. one more very important point. if you want to take advantage of a monster decline to do some buying, you absolutely need to have some cash on the sidelines in order to make your move. otherwise, you'll just be shuffling money between different stocks, all of which are going lower. that's why i'm so adamant that you always have some cash in your portfolio, and the better the market's doing, the bigger your cash position should be. that way when things inevitably go wrong, you'll be able to use the weakness to buy the stock of companies you like at bargain basement prices. when you approach with a long term horrize, you have to remember that big bear market declines can turn out to be excellent buying opportunities as long as you only purchase high-quality merchandise in small increments on the way down. stick with cramer.

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all night i've been telling you about the best way to approach investing from a long life, long generational perspective. how to manage your money when you're young, when you're middle aged, hey, haven't you heard 60 is the new 50? and even wauns you've retired. but there's another aspect of generational investing that i really got to stress here, and that's the need to get your kids interested in managing their own money more generally and learning about the stock market in particular. i say this to parents with children of all ages. while i love the public school system, you simply cannot rely on the public schools or even these ritzy private schools for that matter to teach your kids about money.

okay, they can do a bang-up job with english, history, biology, chemistry, whatever. you want your kids to become fluent in a foreign language, great. the typical high school can teach you french, spanish, and even chinese. however, if you want your children to become fluent in the language of finance, you're going to have to do it yourself. i get the sense that personal finance is viewed as being too simple, too quotidian for most educators to even bother with. it's like beneath them. your typical high school health class will help kids to put a condom on a banana, but nobody is going to explain why it's dangerous to maintain an outstanding balance on their future credit card bills. and, believe me, you can't wait until after your kids go to college to teach them this stuff because at most, institutions of higher education, students get bombarded with credit card offers that can seem irresistible if they don't know any better. i took down five of them. throw in thousands of dollars of credit card debt on top of their student loans and they could be in the hole for decades, which in many cases means you, the

parents, will need to bail them out. we don't want that. raising financially responsible children isn't about just being a good parent. it's about not getting hit up for cash every month even when your kids are well into their 30s. that's why if you want your children to learn about money and what parent doesn't want financially responsible children, then at this point you need to do it yourself. that means you need to have some long, boring conversations about the dangers of higher interest rate debt, like the kind anyone can easily rack up on a credit card, and the need to save money coupled with the power of compound interest for generating wealth like we talked about earlier. but in my view, the best way to make all this dull personal finance medicine go down is with a spoonful of stock-picking sugar. in other words, starting at a fairly early age, i recommend giving your children gifts of stock in high-quality companies that resonate with young people. my classic example here, i've been using it since the show started is disney. give them a couple of shares a year for the holidays, starting when they're old enough to appreciate the big movie

franchises, frozen, star wars, whatever. and because disney has so much going for it, so many blockbuster films planned over many years in the future, not to mention a terrific theme park business, by the time your kids are teenagers, i think their disney holdings will show a nice gain. there is no better way to demonstrate the power of saving money and investing in stocks than having your children actually make money in the stock market themselves and follow it along. and look as much as i like disney, you don't have to go with mickey mouse. it could be any high quality company that will resonate with somebody still in elementary school. the bottom line is the point of getting your kids interested in stocks early is you need to teach them a better way to think about money. rather than viewing cash as something to be spent, you want your children to learn that money is something that be saved and invested to create still more money at the earliest possible age. and, look, if you don't want to do this for your children, do it for yourself because kids who can manage their own finances are kids who won't be begging for your moolah even after

you've gone into retirement. stick with cramer.

okay, cramerica, it's time for me to check out the twitter sphere and take a look at some of the tweets you sent @jimcramer. let's catch up with our viewers at home and see what's trending in their portfolio. first up, we have @fridge 93, who says, @jimcramer, you talk in your book about research, for a new investor what are a few pieces of information we could look for when stock picking. the first thing is i want you to know the product. i want you to know what it does and want you to like it. the reason is because a lot of times stocks go down after you buy them. if you like the product, you'll be more inclined not to panic and get out. then after that, you can read in get rich carefully how to do comparisons, tell you exactly how to rate a stock.

but you can do it on a number basis and just figure out where it should stand versus others. but you've got to like the company first, or i promise you in the first big selloff, you'll become a seller, not a buyer. i don't want that. okay. the next question is from patrick. @jimcramer, jim, for retirement, is it best to dollar cost average index funds or wait and buy on market downturns. this is really important. here is how i do it. i try to do 1/12 a month if i can, but if there's a big break in the stock market, i accelerate some that i would do later in the year and put them to work in that break, even up to a third of it. so in other words, i like to take advantage of the declines and accelerate what i put in. and i've done that for years and years, and it's really worked

for me. next up is larry bloom. this morning my wife said what would they do without cramer? my wife said the same thing. all right. now, look, you know, i'm a teacher. i got some books. i try to come out here every night, but it's really important for people to know what would do you without yourself? this is about empowering you. it's not about giving you ideas. it's about how to look at them. a lot of people look at the show who haven't watched it over the evolution and say, he tells you to trade in and out of this or that. i hope that you know that it's the opposite. longer term investing is the way to make money. index funds and then mad money and doing homework and trying to figure out how to do it yourself. last is jeffrey. jim, would you mind sharing your sunday stock routine, please. all right. i have -- i get this thing from standard & poors. it's pushed to me via e-mail.

it's hundreds and hundreds of charts. i go over each one. i have a file that says "good," "bad," question mark, try to figure out why that went up. and then story idea for show. and i write down each one and where they are and where they fit. and then when i'm done, i tend to do a piece for real money, a long piece. that's the paid side of the street where i look at which trends i see and then for the rest of the week, i send my staff which stocks i don't understand and why and some theories about why we should be doing certain pieces. and it takes almost all sunday except for when the eagles are playing. stick with cramer. ers on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of at&t, and security that senses and mitigates cyber threats, their critical data is safer than ever.

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i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money." i'm jim cramer, and i will see you next time!

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