too. like, if we had an. >> overhead, it's lit up. yeah. >> different colors. like, whack it. >> like that. >> you see that? >> that's a yeah. >> we sold more simon's tonight than they've sold in the last ten years. devon energy melms. >> thank you for watching fast money. see you back here tomorrow at five for more fast 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. other people make friends i'm just trying to. >> help you make some money. >> my job. >> is. not just to entertain. >> but to teach you. >> so call. >> me at one 800 743 cnbc or tweet me jimcramer. >> there is a gaping. >> hole in. >> the american. >> education system. although i hesitate even. to call it a system. >> when you go to. >> high.

>> school they teach you chemistry. >> they teach you geometry. they teach you physics. you have english classes history. >> classes. >> foreign language classes. 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 to say. >> nothing of college financial literacy. >> and i'm not. >> talking about economics here. >> you could be an. >> econ major and still learn. >> nothing about. financial planning. >> or retirement. >> readiness, let. >> alone investing. >> 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's das kapital than to read anything. >> about planning a budget, or certainly. >> picking stocks. >> and that's why i want to constant mission to teach you how to manage your money. >> which is what we do every day in the cnbc investing. >> club. >> with the charitable trust providing a constant source of examples. and 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. >> so i'm betting most of you, even if you don't own individual stocks, still have some money. >> in a 401. >> k plan. now, decades ago, corporate pensions. started going the way of the dodo, and now the 401 k is the main way that americans. >> save for retirement. >> they're offered by. your employer, and they're among the greatest tax deferred. investment vehicles out there, along with the ira. >> and i'm not talking about the. >> irish, american, irish republican army. i'm not even talking about the inflation reduction act, for that matter. 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. and 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 that you absolutely must invest. >> in your 401 k. >> you'd have. >> to be a.

>> fool not to contribute. many experts believe and advise you to max out on your 401 k contributions. >> every year. >> if you could afford to. right now, the maximum contribution is over 20 grand, with room for an additional seven grand if you're over 50, but it tends to rise gradually over time, usually a little faster than inflation. now, in 2004, it was $13,000. by 2023 it was 22,500. either way, serious chunk of change. even with these contributions coming from your pretax income. >> however. >> sometimes i think it can be the wrong approach. i'm not going to sing the praises. >> of the. >> noble 41 k. >> plan or tell you it's the key to your financial salvation. >> because 401 k plans can be a real mixed bag. sure, they have a couple. >> of really great. >> features, but they also have a lot of bad ones. and those problematic, problematic features will eat away at your returns. sometimes through fees that. >> are almost. >> totally hidden from you. i do not like that. so let me lay out the good, the bad and the 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 that it's tax deferred. that's right. it's a tax deferred investment vehicle. in plain english, that means you pay no taxes on what you put in, and then you never pay a penny of capital gains taxes on the profits you make within your 401 k, which allows your gains to compound year after year, decade after decade, totally tax free until you decide to start making withdrawals. regular viewers know that i am 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. if you choose your investments wisely, you should be able to generate an average return of, say, 7% per year, at least historically. and that's being conservative. so at that pace, over the course of the next 30 years, you'll be contributing $150,000. that's pretax income to your 401 k plan, because that money is 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 favored status. you know what? that number would be roughly $110,000 lower. what a huge break. you only ever pay taxes on your 4k money once when you decide to withdraw it. at that point, your withdrawals are taxed as ordinary income, and 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 workforce, that's one huge reason to. like the 401 k, the other one. many employers will actually match or partially match your 41k contributions. for every dollar you invest in your 401 k plan, your employer might say throw in $0.50. up to a certain point, that's free money for you. it's also untaxed. so if your employer even 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. of course your 4k doesn't have any kind of employer match. then it's actually a much less

compelling option because as i said before, 41k plans can have a lot of problems without the match. sometimes you're better off saving for retirement if you have an individual retirement account or ira, which has the same exact tax favored status as a 401 k, now you can only contribute 6500 a year to your ira, or 7500 if you're over 50. and that's an outrageously low amount. iras rolled out in 1975, and while they raised the contribution limit since then, the increase has not kept pace with inflation. if it had, the limit would be more than $8,500. now, i want it personally 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 exactly what you should do every time you switch employers or find yourself out of work. what makes an ira the better option? first, there are the fees. when you invest in a mutual fund within a 401 k, you have to pay the mutual funds fees, but your 401 k administrator the company your employer hires to run these plans will also charge you its

own fees. on average, they take more than 2%. i find that extortionate. most actively managed mutual funds charge less than 2% and they're, you know, actively manage your money. if you ever looked at your statement and wondered why the heck your 401 k holdings aren't increasing in value like they should be, believe me, 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 giving you the choice of a couple dozen different mutual funds. so for those of you who can't pick your own stocks or your 401 k, my number one rule is that before you contribute money to your 401 k plan, you have to make sure it gives you the option to put your cash into something that's actually worth investing in. i spend so much time teaching this in how to pick stocks in the cnbc investing club, because i believe it works. you should be skeptical of a retirement plan that doesn't give you that option to buy individual stocks. if you can't pick your own stocks in 401 k, then you want a

nice low expense index fund, preferably one that mimics the s&p 500. however, if your 4k doesn't even offer that or it charges exorbitant fees, then just go with a self-directed ira from a full service discount broker like a fidelity or merrill edge so that you have control over your money. the bottom line on retirement investing. if the company you work for matches your 401 k contributions up to a certain point, take them for all they're worth. but other than that, an ira is the superior way to go, especially if your 401 k plan doesn't give you any good investment options. let's take calls. let's go to ian in illinois. ian. >> jimmy, chill. >> how are. >> you. >> doing. >> my friend? >> very strong. how about you, ian? >> oh. >> i'm glad to hear it. i'm doing well. >> thank you. hey. >> my goal is to get out of my 9 to. >> 5 as soon as possible and retire. >> and i'm wondering. >> how younger investors should. think about the balance. >> between growth stocks. >> versus dividend stocks. >> all right. 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'll tell you, over the course of the last 40 years that i've been teaching, that's been the right way to go. so let's forget about the bonds until you get into at least the mid 50s and then start adding them slowly. you're a stock guy. you don't want to bet against your life. let's go to michelle in new hampshire. michelle. >> hey, jim. >> i could use. >> your advice. >> of course. >> 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 we 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, but we're not going to stop contributing because historically the rain does go away. and if you only invest when it's good, you're

going to end up with not good prices. carl in washington. carl. >> hey. >> jim, thanks for. >> having. >> me on. >> my question is for the novice investor, what tools and methods would you recommend? i mean, obviously, besides the obvious pe ratio, i mean, how do i evaluate companies for a good investment? >> all right. well, what we do with the investing club, and i know you can say i'm talking to 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 on price to earnings. we value them on book, 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 contributions up to a certain point, take them for all their work. but other than that, an ira is a superior way to go, especially if your

401 k plan doesn't give you any good investment options. oh, man. tonight. school's in session. cramerica. tonight's lesson financial literacy. i'm taking you 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. >> don't miss a second of mad money follow jimcramer on x. have a question. tweet cramer hashtag mad mentions. send jim an email to madmoney.cnbc.com. or give us a call at one 800 743 cnbc. miss something. head to cnbc. miss something. head to madmoney.cnbc.com. it's time to feed the dogs real food in the right amount. a healthy weight can help dogs live a longer and happier life. the farmer's dog makes weight management easy with fresh food pre-portioned for your dog's needs. it's an idea whose time has come.

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america into cramerica, you better believe i would make some changes. so what would the 18th premier of jim cramer look like? hey, for those of you who didn't get that reference, google is your best friend because this is a show about money. let's stick to the more mainstream elements of the american regime. for starters, it drives me nuts that 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 could graduate from high school? i think it should be mandatory, like those awkward health classes where they show you how to dissect a frog. i mean, come on. so can i just take a moment to speak some words that we all believe, but very rarely get to say in polite conversation? look, money is important. it's really important. and caring about the state of your finances does not make you seem like some sort of superficial bourgeois 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. now, neither you nor your partner will be able to qualify for a loan to buy a car or a home, or perhaps even just get a darn credit card. these things matter

in life. they say money can't buy happiness, but i've always found that piece of cliche, conventional wisdom to be dubious at best because hey, listen, being broke is a major buzzkill, as i know firsthand from the time i spent living in my 78 ford fairmont six months california, i sure wish i had an expert to guide me through all this stuff way back then. although i still put money away for retirement when i lived in my car, took it out of my homeowner's budget. so let me answer one of the most important questions out there. what the heck 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 one of the reasons i actually put so much time and created the cnbc investing club. i'm always thrilled when i see members of the younger demographic who are taking an active hand in managing their own money to 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. but i also know many young people feel that

they have all the time in the world, and many more start investing before they're really, truly 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 caveat for all of those who recently out of college, you listen. let's start with a caveat. before you can start investing, you need to pay off the credit card. i mean, this is especially true for younger people because banks have gotten really aggressive about offering credit to college students. no matter how much money you rack up in the stock market, if you're carrying a balance on your credit cards, then it's going to eat into your returns. and long term, the interest in 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 dark credit card balance in full. now i'll take a little each month, but in full each month. automated with your credit card company. if you're worried that you'll be tempted not to. that's what i did see when i got out of law school, i had maxed out 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 right out of the chute, but not enough to pay all

that interest and be able to afford the biggest boom box in the world, which is, of course, my first priority. so i paid down the debt pronto and got my dream box a few months later. i'll never forget how proud i was with that box of my shoulder swaying in the breeze as i worked my way from 46th street to my studio 72nd. the point is, credit card debt is owners. even if you're hitting it out of the park with your paycheck as i was, they are the house. they win, you lose. now let's get to my three lessons for young investors. first, this advice is really for everyone out there, regardless of age or education level. but it's especially applies to fresh college grads. you need to save money. i recognize that not everyone has an inherent predisposition to save. we can't all be natural cheapskates, and nobody likes being nagged about this stuff, so i'm sorry. however, the stock market is a great way to trick yourself into saving a part of your paycheck that you might otherwise go spend. investing in stocks can be fun. if we take my let's say if you join the club, you'll get this. whereas leaving money in a savings account or certificate of deposit feels

totally joyless for many people, even when they've given you decent interest. plus, if you invest your savings in the market, it'll 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 you. 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 risks than, say, a graybeard like myself. when you're in your 20s, you can get away with more reckless strategies like 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. why is that? well, it's not because young people are naturally better speculators. 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 workforce to earn it back then, like you say, like you're me. older investors do need to be more cautious. the

closer you get to retirement, the more conservative your investing strategy must be. yeah, you got to have some bonds, more higher yielding stocks, utilities, fewer speculative stocks trading the single digits. but 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 saying, oh, i'm 40% bonds because i'm 22. are you kidding me? you shouldn't own any bonds. so, young people, i want you to take this advice to heart. especially, i suspect that the recent college grads most likely to invest in the market are also the ones who are the most responsible, the most prudent about their money. and prudence 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. maybe buy 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 back. don't forget stocks do stop at zero.

one of the greatest things about them. oh, and that endless canard that you can't save until you pay off your student loans. 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 student loan. bogey didn't pay that off in a hurry, so pay some of it off. but please don't be hurry up about it. i'd rather have you invest now and pay later. plus, the democrats are going to keep pushing various forms of student loan forgiveness whenever they're in power. meaning if you drag things out, you might have 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. as i told you earlier, and especially put some money into a roth ira, which is ideal for younger investors that i'm going to explain to you later. 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 risk with your portfolio, and it's never too soon to start contributing to your 401 k or ira. especially. an ira. it's a roth. their money is back in. >> scan the code. shop the tank tonight, 9:00 eastern, cnbc. take the bull by the horns every morning with jim's top ten. the biggest headlines, earnings reports and jim's hot stocks right to your inbox. sign up now for free at cnbc.com. slash top ten. >> welcome to cnbc's. >> crypto world. >> cnbc's daily digital show has trading updates the latest headlines, a global perspective and high profile interviews. scan to watch cnbc's crypto world, sponsored by crypto.com. >> we empower those who act, those who see the correlation between predictability and

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oh actually, i have a question ... keep up, nick. do you have to be sick to take a sick day? patty in it is using ai agents to deal with the small stuff, so she can work on the big stuff. agents like secret agents? secret agents i control. with your mind? you know ... i played a secret agent once. - we know. - oh gosh ... i liked it. over here, ai gives tina the info she needs to get the job done. nick, what did we say about touching? no touching. good. ai helps jim solve customer problems before they're problems. for reals? for reals. for reals. servicenow is the only platform that connects every corner of your business, putting ai to work for people. oh, so we all work better, together! my work here is done. excuse me, which way back? uh, follow him. >> we live in a world where you have more choices about where to

invest your money than ever before. a virtual infinity of etfs, mutual funds, you name it. but more choice 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 exchange 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 simply equate investing with putting their money into mutual funds. some 80 million people are. basically half the households in america have exposure to mutual funds. many of you don't have a choice. a lot of 401 k plans don't let you pick individual stocks. 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 picking, which is why i spend so much time teaching you how to do it, both on this show and of course, in the cnbc investing club, where we walk you through the whole process in extreme detail every day. what exactly is so bad about mutual funds? why am i railing against them? simple. if you're investing in mutual funds, you're most likely getting a bad deal. now, 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 here 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, and the amount of money they make depends entirely on the size of their assets under management, which means their biggest incentive is not necessarily to deliver good performance. no, what they're really being good at and what they get paid for is to fund raise. and that's part

of the reason why 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. in other words, if you invest in an actively managed fund for large cap us stocks, then its performance will probably fall short of the s&p 500. to make matters worse, despite consistently underperforming the market, actively managed mutual funds still have some of the highest fees in the business. so even if your fund does manage to beat its benchmark, the odds are good that any outperformance will be eaten 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. that's some industry that's from business. much more sink or swim at my family compound a 24% annually after all fees versus 8% for the s&p over the same period. yet i fretted every second about those fees and 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 that a mutual fund manager ever do that for you. you can read all about it in confessions of autobiograw here's the part where i say not all actively managed mutual funds are bad. some of them have fabulous managers who consistently deliver terrific results. but even here, there's a major problem 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 because once they get too big, it's impossible to generate the same kind of gains. so a lot of these high quality funds are out there, but they don't take new money. and if the managers are not so great person, they'll keep taking more and more money until the performance starts to suffer. hurting you. when the late, great john bogle, he's the father of the index fund, asked me how i could beat the averages so consistently in my hedge fund, i said that i limited my investors. i made it like a club where you had to be nominated to get in. that meant i was never overwhelmed with new money, something that often leads to bad investment decisions. bogle praised me. i have to admit, i did love that and said that if everyone did that, they'd have

much better records too. and maybe that was the real secret to my hedge fund's multi-year outperformance. by the way, if you want to know the other secrets to that success, again, that's what we teach at the investing club. but 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 just too staggering. regular viewers know that. i think your best strategy is to pair a low fee index fund with a portfolio of individual stocks that you picked yourself. that's what i talk about night after night and preach endlessly to club members. but for those of you who don't have the time to do to research individual companies, or if your 401 k plans just won't let you do it, let me tell you the smart way to invest in mutual funds. ideally, you want a cheap, low cost index fund that mirrors the market as a whole, one that mimics the standard poor's 500 index funds, have ultra low fees, and 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. remember, 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 diversified. now, i know there are lots of sector based mutual funds and etfs out there, but 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. as for etfs, in most cases these vehicles are for trading, not investing. i'm not in favor of trading. many etfs rebalance every day, and that can take a real toll on any kind of long term performance. you can lose a lot of money, even if you're right. of course, there are plenty of exceptions here too, like gld, which i like the etf. that's a simple way to play gold. and i like the etfs. of course that mimic the s&p 500. but in general if you're not a pro and you're not managing portfolio of individual stocks, then you should be very careful about fooling around with most of this stuff. here's the bottom line. at the end of the day, i think a cheap s&p 500 index fund

is the least bad way to passively manage your money better than the vast bulk of actively managed mutual funds. but an index fund owns everything the good, the bad and the ugly. and if you do have the time to do your homework, i believe you can beat the performance of an index fund by picking stocks yourself, maybe leaving the bad and the ugly out of it. now, if you don't have the time though, stick with the index fund or and join the investing club. we will help you do the homework. let's go to eric in tennessee. eric. >> 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? >> okay. i would look at sales, i would look at earnings, i would look at margins and i would look at total, the total addressable market to see how things could be. all of those will give me exactly. if you just told me it was xyz corp, i could give you a sense of what i'd be thinking, provided i had some historical data ahead of

me. let's go to paras in california. paras. >> hey, jim. >> i 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. just wanted to. >> yeah. >> you're welcome. >> i 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 i'm huge on fundamental and. >> technical analysis and could. >> use them both to make my 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? >> as always. >> i think everything should be included. and i'll tell you why. because whatever makes decisions and a lot of big fund managers use those decisions and they use technicals, 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 marx will join me to answer some of your more burning questions. so stay with cramer. >> breaking economic news. january's consumer price index insight on inflation amid tariff concerns. plus the lyft ceo on his company's latest results. squawk box tomorrow, 6 a.m. eastern on cnbc. >> did you know taking. >> xyzal at night. >> relieves allergies while you. >> sleep. so you wake. >> refreshed for. >> a more. >> productive day. >> get 24 hour. >> continuous relief that does not fade. be wise. >> all take. >> xyzal at night.

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and it's because of how we need to care for our communities and our customers. i hope that's true. [joe] that's my commitment. [ambient noise] doors bring us together. a dedicated fidelity advisor [joe] that's my commitment. can help you open those doors... oh! can you sign this for me quickly? she's so ready to take over. ...with a comprehensive plan to help grow and protect your wealth for generations. doors were meant to be opened. doors bring us together. a dedicated fidelity advisor can help you open those doors... oh! can you sign this for me quickly? she's so ready to take over. ...with a comprehensive plan to help grow and protect your wealth for generations. doors were meant to be opened. >> 787. >> seven cash. now to. >> get. >> a $100. >> gift card for a free quote. >> no matter how good you are at picking stocks, if you don't know what the byzantine rules about, 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 losing a fortune to hidden fees. i admit, this kind of stuff isn't as fun as picking stocks. you know, i like picking stocks, but over the course of your lifetime, it really can help you build up more wealth in a couple of great stock picks. and the simple truth is that i don't want you leaving the money on the table just because nobody could be bothered to explain it to you. say, 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 for you to go with a roth ira, which is a term i'm sure you've heard countless times. now, i know i've talked endlessly about the benefits of using the individual retirement account or the ira for short, and a 401 k plan to invest for retirement. i don't want to beat a dead horse here. but this is a subject i get a ton of questions about every day. should i put my money in a roth ira account or a regular one? let's start with the roth ira, which anyone can contribute

to as long as they make less than $153,000 a year. i think that 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 at best ended in a draw with poverty possibly winning on points. if i were the king of the forest, i'd make the limits for the ira investing the same as the limits for 401 k. that's going to be a theme of mine for the rest of the year. it's ridiculous that they aren't, but 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 401 k over an ira. we need to allow people to put at least 100. let's say. how about this. you put $10,000 in an ira per year, much more than the current cap, and even a little higher than what the contribution limit would have been if you just started these accounts in 1975 and adjusted the initial guidelines for inflation. yes, i'm championing

$10,000 or bust. i am your friend on this and i will not stop until we get it. 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 once you retire. but a roth ira that works differently with a roth, you make contributions using after tax income. so in other words, unlike a regular ira, putting money into a roth won't decrease your tax bill, at least not up front. on the other hand, once your money is in a roth ira, you'll never pay taxes on it again as long as your cash remains in the account. you don't pay capital gains tax, you don't pay dividend tax. and when you withdraw it, which you can do without penalty after the age of 59 and 59.5, i should say you don't pay any income tax on your withdrawals. none. basically, with a roth you pay taxes now so you don't have to pay any income tax 30 or 40 years from now when you're retired. there's one more

positive point about a roth. after five years, you can withdraw the money you've invested, not your gains, just the amount you contributed. 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 59.5. that's a very that's very, very different from a regular ira where you don't pay any taxes on your contributions now and your gains don't get taxed within the account. but once you start withdrawing the money, every penny you take out is tax. and it's taxed at ordinary income, which means that when you're trying to decide between a roth ira or a 401 k and a regular ira or 401 k, you need to determine whether it makes more sense to pay income tax now with a roth, or to wait and pay income tax once you've retired with a regular account. in short, you're trying to figure out whether you'll be in a higher tax bracket after you retire or lower one. obviously, this is really a complicated question that has a lot to do with the specifics of your situation, your career, and simply how old you are. but my quick rule of thumb for anyone whose marginal

tax rate is 22% or less, which is most of america, i think you go with a roth. better to take the hit up front, then allow your roth ira to compound tax free for the rest of your life. remember, for those of you who don't have the time to pick your own diversified portfolio of 5 to 10 stocks, the smartest thing to do is just park your retirement money in a low cost income fund that mirrors the s&p 500. as you get older, you can add some bonds, but really, until you actually retire, stocks should make up the lion's share of your retirement investments. i know i've said this before, but i'll keep repeating it until they take me off the air because it's so necessary. it's so contrary to the conventional wisdom. how about a roth 401 k? all right, this one works just like a roth ira, meaning you make contributions with after tax income, and then you never pay taxes on that money again. except because it's a 401 k plan. it has of. yes, again, 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 kinds 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. of course, all of these decisions depend on what you think the future will look like. if you believe that taxes are headed ultimately hot up much higher over the course of your lifetime, then a roth 401 k where you pay your taxes now and pay nothing in the future is the way to go, even if you're making a lot of money in the present. at the end of the day, though, this is both 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 for your retirement money. so 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.

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(♪♪) (♪♪) you were made to chase your passions. we were made to put them in a package. >> ambitiously. lately. >> we've heard a lot about the crushing burden of student loans and what the government should or shouldn't do. make some of that burden go away. we lived through a years long moratorium on repayments during the pandemic, which helped supercharge the economy. in study after study, kids who graduate with no debt end up being worth a lot more money than their classmates, who have outstanding student loan balances. although, as i said before, student debt is a heck of a lot cheaper than credit card debt. so really don't sweat the program too much. the

problem here is that it's simply that 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 are thinking of becoming parents, let me just tell you right now that there are very few things you can do for your kid's future that are better than paying for as much of their college education as you can afford. of course, if i were to make a kind of a maslow's hierarchy of financial needs, i'd tell you it's more important for you to save and invest for retirement, which is why i talked about earlier in the show. why prioritize yourself over your children symbol? because if you don't have that retirement money, who do you think is going to support you? the kids. if you ever want grandchildren, you'll need a retirement fund. otherwise your children will spend ages taking care of you instead. however, after you saved enough for retirement in a given year, then it's time to start thinking about college. even if your kid's only a toddler. and the best way to save for college, hands down, is through what's known as a 529 plan. now, these plans vary by state, but 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 way to hedge against tuition inflation. you can buy college tuition credits at today's prices and then use them in the future. that's not what i'm talking about, though, especially not in a world where major national politicians are talking about making tuition free public universities. no, i want you to use a 529 savings plan. again, 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. just like with many 401 plans, this is not my favorite way to do things. i prefer you to have control over your assets, but 529 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. although i didn't. anyone who's read confessions of a street addict knows i traded big blocks of alcoa throughout the whole birthing. admittedly not my finest hour, although the trades only worked out financially if not familiarity didn't really help things at home. here's how 529 works. the contributions are not tax deductible. so you're paying for this with after tax income. once your money is 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 a roth ira except for college and retirement. because of federal gift tax laws, you can contribute 17,000 a year if you're single or 34,000 if you're married and you file your taxes jointly. that is a heck of a lot of money. oh, and by the way, your kids grandparents can contribute to the same 529 plan

too. and if you don't have the money, a grandparent can also start a 529 with your kid as the beneficiary. although 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 beneficiary over the next five years. which is not hard because who writes checks to a seven 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 can contribute $170,000 the next five years. after that, you won't be able to contribute anything without getting hit by the gift tax, which is something you don't want. but honestly, once you've dropped that kind of money to a 529, you won't need to make that many more contributions. the key here, though, is that you want to get that money into your

kids. 529 as early as possible. that's because the greatness 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 you invest that money in a low cost index fund that mirrors the market, the rule of thumb is that over time, you'll make an average of roughly 8% per year, 8%. then by the time your newborn is 18, you should have tripled your money. 85 grand turns into 340,000 grand. that's enough for an expensive private college education and a decent chunk of law school to boot. i know most people can't front load a 529 plan like this, but if you can front load, it's the best strategy. oh, and for grandparents, this may sound kind of grim, but your 529 plan contributions won't count towards your estate tax. hey, 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 it to another relative. we're talking siblings, parents, even first cousins. by the way, if you save all this money and you're ungrateful kid decides not to go to college, you can just withdraw the money from your 529 plan. you just take it. although you'll have to pay taxes on any of your gains, along with a 10% penalty. here's the bottom line paying for your kid's 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 savings plan should be the next item on your agenda. be the next item on your agenda. stick with cramer. (grunting) at morgan stanley, old school hard work meets bold new thinking.

( ♪♪ ) partnering to unlock new ideas, to create new legacies, to transform a company, industry, economy, generation. because grit and vision working in lockstep puts you on the path to your full potential. old school grit. new world ideas. morgan stanley. uncertain times, it's tempting to retreat or simply wait and see. at cme group, we empower those who act. we deliver tools to help manage, risk and capture opportunities in every market climate, across every major asset class. to seize each possibility at precisely the right moment. cme group opportunity is everywhere.

>> you found it then? >> of course i did. -thanks so much. -thanks. this has been great. changing the strategy makes a lot of sense. -doors... -keep an eye out -for the invitation! -can't wait to see it. ...bring us together. a dedicated fidelity advisor can help you open those doors with a comprehensive plan to help grow and protect your wealth. oh! the architect left the plans in the back if you want to take a look. she's so ready to take over. for retirement and everything else you're looking to build. we'll get there. your fidelity advisor can help your legacy last for generations. doors were meant to be opened. doors bring us together. a dedicated fidelity advisor can help you open those doors... oh! can you sign this for me quickly?

she's so ready to take over. ...with a comprehensive plan to help grow and protect your wealth for generations. doors were meant to be opened. my passion. >> i don't have. >> any doubt in. >> my mind that you're going. >> to be insanely successful. >> shark tank coming up next, cnbc. >> if you want to manage your own portfolio, learn how i do it. >> jim is. >> such a. >> great teacher. >> the larger scale. >> is teaching. >> us about the whole economy and how it all fits together. it's more than a club, it's an investment. >> go to cnbc.com slash join jim.

>> i always say my. favorite part. >> of. >> the show is answering questions. >> directly from you. >> i'm bringing in jeff marx, my portfolio analyst partner in crime, to help me answer some of your most burning questions. now, for those of you who are a part of the investing club, jeff will need no introduction. for those of you who aren't members, i hope you still you got to join already. i would say jeff's inside center back and forth helped me to do a great job for all mad money viewers, and i think in some ways more important than others, say members of the club. and if you like this, be sure to join the club. what's really interesting, just so you know, is that he and i go at it every day and we don't agree. if we if we agreed, what would be the point? first up, we're taking a question from gregory in california who asks. hi jim, i started with investing club two months ago and i should have trusted you. thank you. 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 again? now this is something that 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 analytic and more precise. >> well, there's more than one way to skin a cat. i think 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 them up one against each other. and that could be a way to determine if a stock is cheap or expensive versus the group. >> totally. and i think that when i look at companies and i say that, i want to emphasize, let's say 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, but then i've got you bringing back

to earth to remind me that sometimes the price earnings ratio goes sky high, could create problems. and we are, in the end, a trust. and we must do what's right. next we have robert 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 the company when i know there's an excellent chance the stock will continue to rise? okay, so here's why you can't become the company. when i look at an eli lilly, which i think is got the biggest pharmaceutical bull, 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 because it's become dominant. 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 you, i find it just for promise you, i find it just for you right here on mad money i'm >> welcome to the shark tank, where entrepreneurs seeking an investment will face these sharks. if they hear a great idea, they'll invest their own money or fight each other for a deal. this is "shark tank." or fight each other for a deal. this is "shark tank." ♪♪ and i'm shelly hyde. and we're sisters and best friends from st. cloud, florida. we have always been partners in crime. from cutting each other's bangs to teaching each other how to swim, we knew we made a good team. now that we have four kids each, nothing much has changed. we're continuing on all of our adventures. we just have four little wild ones with us.