The Procter & Gamble Company (PG), The Clorox Company (CLX): Cramer Is Bad For Your Wealth

So let me get this straight. A stock which Cramer called the best in the Dow performs the same as the Dow for five months and suddenly shorting it is a reasonable thing to do? Telling the average investor to short The Procter & Gamble Company (NYSE:PG)is ridiculous advice. On top of that, he didn’t explain that shorting a dividend stock requires you to pay the dividend to the person whose shares you’ve borrowed. Or, when you should cover your short, for that matter.

Now, this advice was part of a pair trade where you short The Procter & Gamble Company (NYSE:PG) and go long a similar company – I like The Clorox Company (NYSE:CLX). If the whole market goes up or down the long and short effectively cancel each other out, but if P&G goes down and Clorox goes up you make money. So instead of simply buying the stock of The Clorox Company (NYSE:CLX) Cramer suggests that you gamble on short-term price fluctuations. Great advice.

Just buy Clorox

The Clorox Company (NYSE:CLX) pays a 3.1% dividend, recently increased that dividend by 11%, and owns a variety of dominant consumer brands. Instead of doing a complicated pair trade like Cramer suggests, just buy the best stocks at reasonable prices! Any advice other than that is worthless. Cramer gives trading advice masquerading as investing advice, and unfortunately people listen. Cramer claims to be an entertainer, but when you’re on CNBC giving investing advice some people are going to take you seriously.

The bottom line

There’s a difference between trading and investing. Cramer is a trader, and his advice reeks of it. The average person, if they’re looking to build wealth, will not succeed by trading. They will likely do far worse than the market, although it will be more exciting than investing in an index fund. I’d rather boringly build wealth than excitingly destroy it. It’s clear to me, and hopefully clear to you, that Cramer is bad for your wealth.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble.

The article Cramer Is Bad For Your Wealth originally appeared on Fool.com.

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