Jim Cramer, host of Mad Money, made a compelling argument on Monday that parents should begin investing for their children as soon as they are born. He emphasized that whether parents choose index funds, individual stocks, or a combination of both, it is important to start early.

Cramer pointed out that there are many factors to consider when making investment decisions, especially age suitability. He advised parents to set up accounts for their kids or, at the very least, provide them with shares of stock as soon as possible. The goal is to begin the saving process from day one. He added:

“I’m talking about index funds, which aren’t perfect, but they’re the best way to go if you want to put your money on autopilot and you can’t spend a lot of time looking at individual stocks… I’m partial to cheap ETFs that mirror the S&P 500 because those 500 stocks represent the bedrock of America’s publicly traded companies.”

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He explained that, when investing for an infant, there is plenty of time for the money to grow, with compounding offering significant long-term benefits. As Cramer put it:

“You’re buying for an infant who’s got their whole life ahead of them, their whole life. These kinds of things can really compound over time, meaning if you let it run, then money can build up on itself.”

When discussing what stocks to pick for a newborn, Cramer suggested two types of investments: those with dividends, which can be reinvested to take advantage of the compounding effect, and growth stocks which have the potential for higher returns over time. He recommended selecting well-known names that offer both dividends and growth potential, as they can provide a balance of stability and upside.

For parents looking to open an investment account for their children, Cramer recommended setting up a Uniform Gift to Minors Act (UGMA) account. As children grow older, Cramer stressed the importance of involving them in the investing process.

“I think you should do everything in your power to get your kids involved in investing in stocks, teaching that stocks represent pieces of companies that they might like.”

However, he acknowledged that teenagers can be tough to engage when it comes to topics like stocks. “Teenagers are incorrigible,” Cramer quipped, “The last thing they want to hear about is stocks.” As a result, he advocated for letting teenagers take the lead and choose stocks they are passionate about, rather than dictating what they should buy.

Cramer also observed that teenagers tend to avoid phone calls but are drawn to apps. In fact, he noted that delivery apps, which he initially did not understand, have completely transformed the way we shop and interact with technology. Cramer reflected on how products designed for tech-savvy users were not targeting older generations like him, but now, those same apps dominate the market.

“Bottom line: Please buy your kids a few shares in a name brand that they know and you know. Something they can see and hear and touch then put it away.”

Our Methodology

For this article, we compiled a list of 17 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 10. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

17. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 286

Cramer discussed that teenagers’ likes and dislikes can be used to guide their investment choices. Talking about his kids discovering and liking tech before he did, Cramer mentioned Amazon.com, Inc. (NASDAQ:AMZN) and said, “No, FAANG wasn’t purely their creation. I figured out Amazon.”

Amazon (NASDAQ:AMZN) provides a wide range of services, including e-commerce, advertising, and subscription-based offerings. Around a week ago, Cramer discussed the company’s recently released earnings report and said:

“Next up, Amazon. Now, they reported a really great number tonight with better than expected sales, up 10% year over year, monster 37 cent beat off a $1.49 basis. Top line beat was driven by the core e-commerce business with the company calling this past holiday season the most successful yet for Amazon. But all three of the company’s segments beat operating income expectations for the quarter.”

16. Netflix, Inc. (NASDAQ:NFLX)

Number of Hedge Fund Holders: 121

Discussing his children’s partiality toward technology, Cramer mentioned Netflix, Inc. (NASDAQ:NFLX) and remarked:

“… That’s all digital now. My kids get their news from their iPhones and they get their entertainment from Netflix.”

Netflix (NASDAQ:NFLX) is a global streaming service offering a diverse selection of movies, TV shows, and original programming to millions of subscribers worldwide. In December 2024, Cramer was bullish toward Netflix as he mentioned professionals’ and viewers’ sentiments toward the company and its streaming service.

“Next up, Netflix. What the heck were we thinking when we didn’t own Netflix? Is there a week that goes by where we don’t talk about a Netflix show? The big linear TV networks like to do expensive shows about fires and hospitals and police… It’s been their formula since the 1970s. They just keep doing the same thing, failing each year. But Netflix, they come up with things like Jake Paul versus Mike Tyson and it did huge viewership numbers… Millions of people watched it… We watch all sorts of… programs from other countries because we’ve been taught by Netflix to like subtitles. It’s insane how good this company is…

And yet Wall Street doubted Netflix the whole way when it came to the new ad-supported subscription tier. They didn’t get it perfect right out of the box and… many of these who followed the company presumed it was a bust. Oh, it was hardly a bust and it’s just gonna get bigger and bigger. It’s easy to say, of course, that… anyone could have had it. But those who spend their lives examining this company thought otherwise.”

Cramer then noted that professionals, who have a more cautious approach to investments, advised staying away from the stock, especially due to the high P/E multiple, with Netflix (NASDAQ:NFLX) previously trading at 50 times earnings, which some consider too steep. However, Cramer pointed out that the professional community’s doubts did not align with the views of regular investors.

Cramer noted that the “home gamers,” who are more enthusiastic about Netflix, have seen the stock rise significantly. Despite the valuation concerns, he said that it seems that the general public’s love for the company has outweighed those worries, driving its strong performance. Over the last year, Netflix (NASDAQ:NFLX) stock rose over 80%.