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INTRODUCTION: GET RICH AND STAY RICH
Most people don't think about it, but there's a difference between making a lot of money and building lasting wealth. When it comes to money we think that striking it rich is the ultimate goal. I know because I used to feel that way. In reality, getting rich isn't the financial finish line. It's the first lap of a much longer race. I'm talking about ensuring long-term prosperity for you and your family: not just getting rich, but staying rich. That's what each and every one of us truly wants to achieve with our money, and I don't care who you are, who your parents are, where you live, or what you do for a living: you can do it if you let me help you. I don't care if you don't have two cents to your name or if you owe thousands of dollars in credit card debt. I am confident I can get you there. You may think of yourself as someone who's awful with money; you could be a person who's tried and failed to get anywhere with every single financial plan you've ever been handed, like so many failed faddish diets. Whether you're 16 or 60, sending your kids to college or sending yourself to college, I'm writing this book to tell you everything you will ever need to know and everything you must do to create and maintain the kind of wealth that lasts a lifetime. I want you to get there and stay there.
A lot of people who try to sell you advice about your money are doing it to make money themselves. They don't care whether you succeed or fail with their advice because they're just looking to sell books or earn fees. I made more money than anyone ever needs working at my old hedge fund, and if I wanted more, I'd start another one. I am confident that I could raise a billion dollars to manage tomorrow, but frankly, I'd rather help you. That means more to me than working for people who are already rich. Perhaps it's because I'm a good guy, or because I just want to look like a good guy, or maybe I do it because I love positive attention. Maybe it's because after years of making money for myself, it just feels right. At the end of the day, the "why" isn't important, as long as you're satisfi ed that I'm writing this book in good faith to help you. What's important is the "what." I spent fourteen years running a hedge fund, which means that the only higher purpose my job had was to make incredibly rich people even richer. I used to joke that my job was to move people higher on the Forbes 400 richest people list -- not a higher calling.
I've now spent the past seven years since I retired from the fund writing books and columns for TheStreet.com and New York magazine and hosting a radio show and two television shows: first Kudlow & Cramer, then Mad Money. The venues have changed, but my goal was always the same: to share my experience and expertise with regular people to help them become rich. In this book, I'm aiming even higher than that: I'm teaching you how to make money and use it to ensure enduring prosperity and permanent financial security over the course of your entire life. The disciplines and the knowledge you need to build a firm foundation for your wealth and maintain it for the rest of your life are not the same as the ones you would need to make yourself rich by investing in stocks, the subject of my previous two books. If you're looking for long-term financial security, I would hope you'd set your sights higher. For long-term extravagant wealth, you need to know how to take advantage of tax-favored vehicles like 401(k) plans and IRAs; you need to know when you should buy bonds rather than stocks, not to mention the kinds of bonds you should choose; you need to know how to save for college; how to guarantee you have a smooth retirement; how to save; how to borrow; when you should buy a house; when you should be taking risks; when you should be avoiding risks; what you must teach your children about money; which mutual funds you should put your money in; and which stocks will look good for the long haul, the next twenty-five years. These are the subjects people beg me to address, and I am ready and willing to do so. I have the answers for all of the financial questions you, your parents, and your kids have about getting rich and staying rich. Don't be intimidated -- I'll explain everything in layman's terms, not in the Wall Street gibberish the professionals use to scare you into relying on them instead of using your own judgment.
But what about my judgment? You want to know where my advice comes from, and I don't blame you. Most of what I know about making money I learned in my years on Wall Street, first as a broker at Goldman Sachs, advising the wealthiest of the wealthy about all these lifetime issues, and then as the manager of my own hedge fund, Cramer, Berkowitz & Company. I've had a long love affair with stocks, but stocks are only one of many tools, albeit the most important one, that we're going to use to create lasting prosperity for you and your family. I know better than most people the difference between having money and not having it, or having it and having a whole lot of it. I'm a self-made multimillionaire, and I'm going to share with you the lifelong disciplines that made me rich and have kept me that way.
As I said, I made my own money. I've also been poor. In fact, I wasn't just poor; I was homeless and destitute. In 1978 I spent six months living in the backseat of my Ford Fairmont while I worked as a homicide reporter for the Los Angeles Herald Examiner, unable to afford even rent money. By 1979 I had moved up in the world: I was living in the most spacious corner of my big sister's studio apartment in New York City. I was the last person in the world anyone was ever going to ask for financial advice, but even then I was diligent and self-disciplined about money. I may have skimped on the auto insurance and skipped on the rent, but I still put $50 a month into the best mutual fund I could fi nd, Fidelity's Magellan Fund. I have always been fascinated with mutual funds and managers, and I am going to tell you all about which ones you need and which ones you should avoid. I know what it's like to need money and not have it, and ever since those early days I have lived in desperate fear of poverty. Living out of my car with barely enough money to get by convinced me that I had to become rich, that no amount of money was too much, and that I would have to do it with more than just my meager paycheck. I would have to parlay that paycheck into something much bigger, using whatever financial resources I could get my hands on. I spent twenty years single-mindedly pursuing greater and greater sums of money until well past the point where more money made a bit of difference. I know it's possible for anyone to get rich and stay rich because I did it myself and I'm no different from any of you.
Like most things in life, getting rich and staying that way take a lot of hard work, a lot of knowledge, and a little bit of good advice. There are many ways to get your hands on a whole lot of money, though few of them can be called easy. You can invest in the right stocks, get a high-paying job, start your own business, or inherit the money, to name just a few. But there's only one way to make sure your newfound wealth leads to long-term prosperity: you have to use your money to make more money, and you need to do it the right way. It's hard work, and it takes diligence, but in this book I've already done a lot of the work for you. No, I don't have six easy steps to financial security, nor do I have three magic habits that will make you a millionaire, and I can't tell you the financial secrets of the superrich because as far as I know, they're just as feckless with money as ordinary people. People who promise that they can make you truckloads of cash and help you keep it as long as you follow their simple five-point program aren't telling you the whole story. Easy steps turn out to be not so easy, and advice that seemed great in theory turns out to be next to useless in practice. I suspect that many of these people have never made a dime except in book sales! I read a ton of these personal finance guides because every time someone writes a new one, which seems like every five minutes, the publisher comes to me to pen the introduction and give it my seal of approval. Many of these books are well-written, some of them by terrific people, but they generally don't tell you what you need to know. I swear, more books have been written about creating and keeping wealth than any one person could read in a lifetime, but I have yet to find a single one that actually tells you, in detail, what you must do during every stage of your life to develop enduring wealth and ensure that you never have to worry about your money again. So I decided to fix that problem by writing this one.
For most people, there are few things that are more confusing and frustrating than trying to manage their finances. I can't tell you how many people I've spoken to who agonize over trying to pick the right mutual fund and end up giving up, their money still in a checking account, because the decision was too hard and reliable information was too scarce. If you're looking for a financial plan, it's easy to get a broad outline, but very hard to fi nd anyone who will give you specific, detailed advice. But that's exactly what I'm going to do. Others are more than willing to show you the forest: save money, pay off your credit card debt, contribute to your 401(k), start an IRA. But no one will identify the trees, where the money is actually grown. How should you manage your IRA? What, specifically, should you own in your retirement and discretionary accounts? Which of the most popular mutual funds available in your 401(k) plan is the best place to put your money? I'll even recommend the best mutual funds, using all the data available as I write this book.
Too many books about money go wrong because they try to offer timeless advice. There's no such thing as great timeless advice. The really useful financial information is time-sensitive. I don't know if the people who try to write timeless advice do it to create financial planning books for the ages or to avoid exposing themselves to risk. Nobody will ever get pilloried for telling you that the best long-term investment is a low- cost index fund, like the Vanguard 500, which is the classic cheap Standard & Poor's 500 index fund. Never mind that unless we're talking about John Bogle, the man who invented the index fund, no one dispensing this advice is adding even an ounce of value to the conventional wisdom. Timeless advice is the lazy man's way out, and though I've been called almost every unflattering word in the dictionary, I've never been called lazy. Instead of regurgitating eternal principles, I've rolled up my sleeves, Mad Money-style, and found the best places to put your money right now.
When I select the best actively managed funds, I am choosing the best mutual funds that you should invest in today. It would be nothing short of miraculous if every single mutual fund I highlight in this book beat the market over the next few years, but I have total conviction that most of these funds will be winners. I would rather stick my neck out by giving you specific, timely advice than play it safe with timeless but vague suggestions. I'll tell you how I go about ranking funds too, but the point isn't just for you to use my methods, it's for you to try to make money in the mutual funds I recommend. I was a manager who beat almost every other manager. I know what to look for that others don't. I grade them the way a professor grades kids in college, except I grade them hard. As I say at the beginning of every Mad Money show, I am not about making friends, I am about making you money, and you must know that when I recommend a fund, it's not to please anyone but you. Unlike so many others, I have no skin in the game. I don't get rebates, referrals, kickbacks, percentages, commissions. Nothing. Just the satisfaction of knowing that I am using my twenty-five years of successful money management to help you become wealthy.
Sure, I've got plenty of things to say that will still be true a hundred years from now, when these mutual funds likely will no longer even exist. I'll explain everything you might need to know about creating wealth, from the day you're born until the day you decide you have enough dough. That means you'll read some things in this book that you've read before. I'm going to tell you to save money, to invest in your company's 401(k) if it has one, to start an IRA, and all the other boring but good advice. The difference between this book and all the other books that have been written about personal finance is that I don't stop there. I don't think it's helpful to tell people to start an IRA without telling them how to manage it and giving them some specific ideas about what to buy for it -- nuts and bolts that will make you more money than the other guys because that's what I was put on earth to do.
If you're looking to build your wealth over the long term, to ensure prosperity for yourself and your family, then stick with me and I'll teach you how to get rich, stay rich, and stay mad for life!
Copyright © 2007 by J.J. Cramer & Co.