stock is right at the point where it was when it reported its q1 earnings, it hasn't bounced a whole heck of a lot. >> our time is expired. thanks, so much for watching. i'm mellissa lee, check out the action. happy memorial day, 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 muffin starts now. >> hey, i'm cramer, welcome to "mad money," welcome to cramerica, other people want to make friends, my job is not just to entertain you, but to educate and tweet you. every time i come out here for two reasons, the first one is obviously i like adventure, but

secondly, i want to help you're build and preserve your wealth. we live in a time where it's difficult to maintain wealth unless your born that way. there are millions upon millions of people in this country, but there simply aren't -- the truth is if you want do become really wealthy in this country, unless you're born with a silver spoon in your mouth--invest it wisely year after year, you can make your wealth grow to the point where you become, if not filthy rich, then at the very least, financially independent. that means you don't have to

worry about job security. 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 financial independence. but in order to do that, we need to talk about the concept of generational investing, because the kinds of things you should be doing when you're young, is very different than when you get older. but there's one constant when it comes to managing your finances no matter how old you are. even when we're in a bear market, and it feels like stocks go down every single day. when you take a long-term view,

you'll see that the stock market is by far the most -- it might crash like it does upon occasion u but if you take the along view, the very long view, stocks tend to goo higher. when i got started in the business, the dow jones industrial average was trading at 800, and the dow stands what you might call well above that mark. that's a pretty fantastic amount of wealth creation. and that's why i'm so adamant that no matter how old you are, no matter how wealthy you are, you should have some of your money socked away in the stock market. for those of you concerned that the market is rigged or it's an unreliable place to put your

savings. if you go all the way back to 1928, before the stock market crash that preceded the great depression,through the end of 2014, the average earnings is about 10%. show me an asset class with a better average return, stocks aren't just the best game in town, they're the only game in tune if your goal is to gain wealth. for some of you who want to get risk carefully, that 10%, i know that may not seem like such an impressive number, that's more than double what you can expect from a 30-year treasury. that's next to nothing. when you're taking a long-term view, which is what we're doing tonight, meaning planning for your entire lifetime, racking up

a 10% return from a simple s&p 500 indexed fun which you know i prefer simply has the market's reference. that 10% figure, including dividends has held pretty steady. 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 compound. think of it like this, if you invest $100 in the s&p 500, y you've got $500. the gains get keeping larger and larger because each year you're making additional money off the previous year's profits. eventually the 10% average, you'll double your money in less

than 7 years, for those of you who are young and right out of college, waiting 7 years to grow your money seems like forever. however the truth is, as you get older, an investment that can pretty consistently take your money up in 7 years time and double it, it becomes pretty incredible. the younger you are, the more time you have for your money to grow. young people seem unimpressed by that kind of return. so 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, let's say you invest $10,000 in an s&p index eed fun

right now, and let's jufl suppose that the next 40 years aren't that different from the next who years. if the s&p holds steady at around 10%, that means in two decade 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, pay for a chunk of a pretty ritzy retirement. and that monster multiyear gain didn't require any kind of stock picking. it doesn't require you too trade or time the market or even do any sort of research into individual companies, which i know is hard for most of you, just just need to put most of your money in an s&p 500 index fund, granted you're waited 40

years, but $450,000 when you're approaching retirement, it's way more than that $10,000 that you initially invested. a little money saved and pass e passivepassiv passively invested in the stock market is the easiest way possible to turn into a massive fortune when you're older. all you have too do when you initially save that money, is let it sit on the sidelines, in a 401(k) or ira. the same applies when you're 30, or 40, or 50, but you get a lot more bang for your buck if you start younger. it's 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. it's not just capital gains, but also dividends, everything gets reinvested. >> caller: hey, question, mutual funds and index funds claim minimizing single stock risk. >> right. >> caller: but inherntly, though, would. you say that mutual funds have more risk than a single stock portfol portfolio. >> that's why always suggest that there be two portfolios there should be that capital preservation fund, that should be in a diversified fund.

the rest should be "mad money," that's why we call the show "mad money," i don't want the bulk of your portfolio in single stocks. i know you want to pick stocks or you would been watching the show. brian in oklahoma, brian? >> caller: how do you value a company's -- one company versus another, measurable value? >> we spend a lot of time in get rich carefully talking about that. what you're really trying to do is measure the future earning s stream, you can figure out what you'll pay for that stream now, if you take a longer term view, you can get a feel for what that stock might be able to give you for dividends and capital gains, dividends tend to be for portfolio preservation, and t.

you've got to to be thinking about what a company earns in the future. this show is about helping you build and preserve your wealth. and the stock market is the best tool out there to do that. plus i'm not pulling any purges here, what you absolutely must not do in your retirement account. and what you need to do in a bear market. stay with cramer.

you think traffic's bad now, the future's going to be a nightmare! does nobody like the future? c'mon, the future. he obviously doesn't know intel is helping power autonomous cars and the 5g network they connect to. with this, won't happen in the future. thanks, jim. there's some napkins in the glovebox. okay, but why would i need a napkin? you could have just told me a bump was coming. we know the future. because we're building it.

i need the phone that's where i happen to be... to be the one that rings. i need not to be missed phone calls... to not be missed. i need seamless handoff... canyon software. from reception, to landline, to mobile. i need one number... not two. i'm always moving forward... because i can't afford to get stuck in the past. comcast business. built for business. 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. you don't want to put all your money into speck ulative stocks. it 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. i always tell you that you need to have two despite policy cash, your retirement fund, in a 401(k) or ira, or your "mad money" or portfolio where you can start taking some risk once

you've got your retirement portfolio. the truth is betting on your retirement is betting on your longevity, you want to live for a long time and you shouldn't have to work your fingers to the bone. regular viewers here 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 an etf that mirrors the s&p 500. indexed funds are a fabulous way to get expose to the stock market's gains, without the time necessary to pick individual stocks. and if you don't have the time or inclination to pick individual stock, then all of your money can go into an s&p 500 indexed fund. it's very important that you get some exposure to the market. once you've saved more than $10,000, that means you have

enough to start a diversified portfolio of five stocks, anything less than five stocks in five different sector, yarent diversified. it's only when you have saved the max money for your retirement that we start talking about that discretionary portfolio where you start taking more risks. a lot of people think i just want you to be in individual stocks, that's just wrong. indexed funding and then individual stocks. your retirement portfolio might not look all that different. that's true for a host of reasons, when you're still in your 20s or you're still in your 30s. when you invest in something risky, and it crosses your portfolio, you still got the time to make your money back, you've lost your whole working

life, you have years and years of paychecks, however if you're pushing or approaching retirement and you lose a fortune in the stock market, u you're going to have very little time to fix it. not only can young people afford that take advantage of -- you shouldn't go crazy and speculate all of your savings, that retirement portfolio is entirely offlimits. you should bet on some of these high risk long shots. i believe in this. i'm talking about smaller, les well known companies with massive upside potential. c coupled with enormous down side risk. the classic examples here are the biotech stocks. even just a piece of positive data that's years away from

hitting the market. these smaller biotechs, they will get slammed if there's any negative news. and the stocks could be very difficult to own in bear markets. looking for good opportunities that can work regardless of whether we're in a bull or a bear market. why do i insist that younger investors speculate, take risks that might scare older people? because the gains here can be absolutely stunning. and it would be down right foolish to pass up the opportunity to own some winners, even if it means picking some losering along the way. when you're in your 20s and 30s, you should be investing like a young person. when "mad money" came on the air in 2005, our very first ceo

int interview was a biotech -- 17 years. 17 years. without ever really developing anything noteworthy that could move the needle. since then that company's been a power house, with the stock taking off in the stratosphere. fast forward 10 years in the summer of 2015, and that stock had traded all the way up to 592 dpl . for the sake of round numbers in this example, 500, ten years ago. how about this? a gain of roughly 9,900%. not a double, not a triple.

not a quadruple. no regeneron. it worked out in a major way, but many similar small cap biotechs have done nothing, or lost money over a period of time, you won't always be able to identify who are the winners in this kind of space, but that's okay, as long as you cast a wide net, speculate using a brack basket. as long as the 10th one was regeneron, you still would have made a modest gain. 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, it's a much more risky gain, and i only

suggest playing with cash that you absolutely can afford to lose. 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 disciplined and it's a small part of your portfolio, not your retirement portfolio. i have the answers to the questions on top of investors minds, stocks or bonds, the ancient wisdom you have heard is wrong. and what to do when a bear market strikes. many of you will have to take action tomorrow, don't miss this, stick with cramer.

it's time to address a major issue that i have to admit, i don't spend enough time discussing on "mad money," stocks versus bonds. you don't hear me recommending you invest in bonds very often. the show after all is about tooks. bond yields have been absolutely pal try, both business historical standards and versus what you can get from safe

paying stocks. even when the market has been getting absolutely pounded, bonds simply haven't represented very good values versus equities, that's why i so often castigated you got how prudence can be the riskiest strategy of all. you're basically ensuring that you'll get a very low return on your investment for many years to come. when you invest your capital, like i said before, stocks are still really the only game in town, even after, can i say so many years. however i don't want to make it sound like i'm poo-pooing bonds all together. even though i believe that stocks are the best way for you

to grow your capital over the long-term, even at moments when returns are at historically lee levels. stock investing and bond investing are two entirely different things. stocks are for capital appreciation, bonds are all about capital preservation, they protect your money, nice and steady, all be it small return. that's still offsetting influence for the most part. you put your money in stocks so you can grow your wealth even greater. you invest in bonds to protect whatever your wealth you simply can't afford to lose. there it is. 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, you take more risk so you can get more return. people in their 20 or 30s can take that attitude because you is the rest of your life to make

back what you lost. bonds are a staple for saving for retirement, because it's the safest bet out there. but most financial experts will say you need to own a lot more bonds a lot earlier in your lifetime than i think is necessary. even if you invest in 30-year treasuries, our government's longest bonds with the higher yields, they don't produce much in the way of appreciation. bonds, let's say they're yielding 3.5%. that is much higher than the 2.5% to the 3.2% range we saw in the first couple months of 2015. as long as you reinvest your coupon payments back in treasuries, you might dun your money in 20 years. the average for the s&p 500 is 10% annually, which will let you

double your money in a little more than 7 years, search 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, i think you're being too cautious. even in your 401(k) or your ira, you want to be weighted more towards tooks while you're young. it will allow your gains to compound tax free year after year after year, and i told you how great compounding is, but as you get older, owning treasuries, especially in your retirement funds is essential. because in the stock market where you can lose enormous a lots of money in the blink of an eye, you do want to follow your money into u.s. treasuries, where you know your investment won't advantavanish overnight. let's get down to brass tax,

precisely how much of your portfolio should you keep in bonds versus stocks. that depends on how old you row. i don't think your port folio should have any bonds whatsoever until you turn 30. if you own wonders when you're 25, you're wasting your youth. 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%. your 60s when you're approaching retirement age, take it up to 40% to 50% bonds. i still think you should keep a substantial portion of your port folio in the stock market. once you stop working, you really can't afford to take too big a losses with your investments.

especially since you're going to need to start spending the money in your retirement accounts. with 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 your entire life. so your portfolio should be creating more wealth just in case you live longer than you expect and you need more money. here's the bottom line, for younger investors, putting your money in bonds is a fool's game, but as you get oillder, you shod increase bonds to 50% by the time you're in your 60s. because that will protect against the volatility of the market. even if you retire, you should still keep owning stocks so that

some of your capital can still keep appreciating over the long-term. >> caller: boo-yah, jim. i'm a big fan of the show, i love your book, "get rich carefully." i need your advice on a stock, especially if i'm looking to start a core position, give on ow cost based averaging is. >> this is a great question, and the reason why it's a great question, is because a lot of people want to draw a line in the sand, they want to be in a position where they kind of got rid of it. they bought it and they put it away. taking into account human frailty, i prefer to buy a quarter of my position. if the stock goes higher, what a terrible high quality problem, if it goes lower, you want to

buy in stages, because i don't want to be overconfident. do it in stages. >> 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 account, or a regular ira. >> if you watch this show, i think you can do it yourself. the annuities have fees, i'm not against anything that can help people build wealth, but a lot of annuities have fees that can eat your money up. investing in stocks and investing in bonds are two very different things.

young investors, you just don't belong in bonds. i'm not kidding around by this, if you want to ensure a strong retirement, you're going to want to listen to my advice and take action tomorrow morning, and i'm answering the questions you've been sending me on twitter. so why don't you stay with cramer.

, tonig ,. taking a much longer time horizon than we normally discuss on "mad money." i'm talking about taking a 30, 40, or even a 50-year view. you can't buy stocks you can just hold for the next year ore two. regular viewers know my mantra, it's buy and hold.

no matter how confident you are in a company, you need to check up on it on a regular basis. that doesn't mean it's impossible to take a truly long-term view. when you start examining stocks over a multidecade time horizon, one thing becomes clear, if you know what you're doing, a bear market can simply be a different kind of opportunity. when stocks are getting slammed, when they're getting hurt no matter where you look, you have to recognize that you could be getting a terrific opportunity to pick up some high quality stocks into the long run. i'm not giving you license buy stocks indiscriminately, when you're facing a bear market, when the average is down to 5%,

from their highs, and they seem like they could go even lower, then it probably makes more sense to start buying those stocks rather than selling them, as long as you're willing to make some short-term pain for long-term gain. you're just asking yourself to look like a moron, if that stocks go lower, buying small chunks of your position increme mentally on the way down. you have to wait for that stock to go down meaningfully and substantially. 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, look at those hideous

declines during the financial crisis. if you use that weakness to -- we snap back from those alsos even more rapidly, this is why warren buffett seems sanguine when the market goes bust, he has a time horizon. don't get me wrong, if you have a shorter time horizon, if you're a hedge fund manager that seems to be put for the day, then you cannot afford to approach a bear market. if a hedge fund manager -- you'll lose enough money in a short period of time. but the vast majority of you are not running hedge funds, you don't need to make money every

day, or even every month or year, what you need is a long-term strategy that lets you rake in massive multiyear gains, so you have enough to retire comfortably and send your kids to college. this is not an excuse to hang on to loser stocks of loser companies simply because you hope one day eventually they'll turn afternoon. the ugliest most visicious marks that send everything down, you can take advantage of them as long as you're patient enough, because if you pounce too quickly, you'll end up buying way too close to the top. you have to be careful about what stocks you pick during a bear market. you need to do your home work and look at the stocks and their balance sheet. during a bear market, you must absolutely not buy the stocks

that are in the blast radius of whatever's causing the decline like in 200 instead you should search for collateral damage stocks, and if you own anything in the blast zone, please don't hesitate to sell, sell, sell and blast anything something that's safer. if you want to take advantage of a monster decline, you absolutely need to have some cash on the sidelines in order to make your move. otherwise you'll just be shuffling your money between different stocks, all that could be going lower. the better the market is doing the bigger your cash position should. that way when things inevitably go wrong, you'll be able to buy on the weakness. here's the bottom line, when you

approach the stock market with a truly long-term time horizon, some bear market stocks could be a buying opportunity, as long as you buy high quality merchandise on the way down. stick with cramer. # 1k # # 1k 12k5 1k 1k 12kw5e your insurance company

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all night i have been telling you how to buy stocks from a generational perspective. haven't you heard 60 is the new 50? and even once you retire. but there's anothers aspect to generational investing, that's to get your kids involved in the stock market. while i love the public school system, you simply cannot rely on the public schools or even these ritzy private schools.

you want your kids to become fluent in another language,let the schools do it. but if you want your kids to learn personal finance. your typical high school health class will help kids learn how to put a condom onbanana, and believe me you can't wait until after your kids are grown to teach them this stuff. throw in thousands of dollars of credit card debt on top of their student loans and they can be in debt for decades.

that means you the parent has to bail them out. it's not just about being a good parent, it's about your kids not hitting you up. you need to have some along boring considerations about the dangers of high interest rates, like the kind you can easily rack up on a credit card. but in my view, the best way to make all this personal finance medicine go down is -- i recommend giving your stock to high quality stocks, my example that i've been using is disney, give them a couple of shares a year. because disney has so much going for them, so much blockbuster

films, over many, many years in future. not too mention a terrific theme park business. there is no better way to demonstrate the power of state offing money and investing in stocks than having your children make money in the stock market themselves and follow it along. and as much as i like disney, you don't have to go with mickey mouse, it could be any high quality product that will resonate with somebody in elementary school. you simply need to teach them a better way of viewing money, rather than cash is something to be spent, you need to teach your children that money is something that can be saved and invested to create still more money at the earliest possible age. if you don't want to do this for your children, do it for yourself, because kids that can manage their own money will mean

kids that won't be bugging you for mullah even after you have gone into retirement. ight warre? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade.

okay, cramerica, it's time for me to check out the twitter sphere and read some of the tweet you have sent @jimcramer. you talk in your book about research, for a new investor, what are pieces of information

we should look for in stock picking, the first thing is i want you to know the product, i want you to know what it does and i want you to like it. the reason is because a lot of times stocks go down after you buy them, and if you like the product, you'll be more inclined not to panic. just figure out where it should stand versus others, but you have 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, it's sutera @patsutera. jim, for retirement, is it best to cost average? this is the way i do it. i try to do it 1/12th a month if

i can. but if there is a big break in the stock market, i accelerate what i want later in the year. so in other words, i like to take advantage of the declines and accelerate what i put in. and i have done that for years and years and it's really worked for me. otherwise divide by 1/12. larry blumen, my wife says what would i do without cramer? i try to come out here every night, but it's really important for people to know, what would you do without yourself. it's not about giving you ideas, it's about how to look at them. a lot of people watch this show that haven't watched out over the evolution. i hope that you know it's the opposite. longer term investing is the way

to make money, indexed funds and then "mad money," then do your home work and find out how to do it yourself. jim, would you mind sharing your sunday stock routine, please? i get this thing from standard & poors, it's pushed to me through email, 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 one went up. and story ideas for the show, i write down each one and where they are and where they fit. and then i tend to do a piece for m"mad money," where i look t what trends i see, and thenit t up almost all of sunday except

for when the eagles are playing. stick with cramer.

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