Marco.org

Jim Cramer’s book, Real Money, has had the opposite effect that he probably intended: it convinced me that I shouldn’t buy individual stocks — or at least, they shouldn’t make up the bulk of my investments. (He recommends devoting 20% of your investments to high-risk, discretionary stocks while you’re young. That still sounds good.)

That makes most of the book’s other lessons pretty useless to me now, other than preventing me from losing a bunch of money in the long run. But there was one other great part, with only one page devoted to it (page 200), that’s worth the price of the book for me: the list of recommended mutual funds for people who don’t want to buy individual stocks.

There’s so little guidance out there on this topic for newbies (like me and probably you) that I’d love to share this information here. Here are his recommendations:

HIGH RISK:

• KAUAX: Federated Kaufmann Fund A: Lawrence Auriana and Hans P. Utsch, mgrs.
• SHRAX: Smith Barney Aggressive Growth Fund: Richard A. Freeman, mgr. This one’s looking pretty bad from the other ratings, such as Morningstar. I’d go with KAUAX for high risk instead.

MEDIUM RISK:

• FCNTX: Fidelity Contrafund: William Danoff, mgr. This is a nice substitute for an index fund. It’s a little better than index funds with a bit less risk. Cramer recommends this for most people who only want one fund.

LOW RISK:

• OAKBX: Oakmark Equity & Income Fund I: Clyde McGregor, mgr. This is a more conservative fund, with a large percentage invested in bonds. Considering that, its returns are impressive. Look especially at its history back to 2000 (in Google Finance, scrollwheel down all the way with the mouse pointer in the graph) — compared to the others in this list, it’s the only one that has a consistent climb.

ALSO RECOMMENDED:

• JCVIX: John Hancock Classic Value Fund: Richard S. Pzena, mgr. Cramer claims this one is low risk, high reward. But it’s not doing well recently. Looks like it was hit very hard by the subprime problems and recent recession, since its major holdings are mostly banks and retailers.

In case you didn’t know: (I didn’t)

If you already have an investment account with someone else (Vanguard, E*TRADE, etc.), you can probably still buy these funds without starting a new account at their respective banks. Search for their ticker symbols from your investment account to find out.

Sidenote:

There’s a huge lack of good, practical, useful financial advice for regular people. Maybe it’s because money discussion is taboo. I don’t care — we’d have many fewer problems with personal finance in our society if people were better educated about it.

I’ve personally lost thousands of dollars from being uneducated (or under-educated) about finance, from both direct losses and missed opportunities. I’m lucky that I’m finally learning about this as a debt-free 25-year-old.

Hopefully we can have a more open discourse about personal finance in our culture. It’s too painful to see 50-year-olds without retirement funds because nobody ever told them they needed one, or 20-year-olds with credit-card debt because they bought frivolous things and didn’t consider the math.