- "I'm going to give you five reasons why it's so hard to make money in the stock market ... [preparing] you for the inevitable pain that comes with owning individual stocks," CNBC's Jim Cramer says.
- "These have all snuck up on people, making them queasy," the "Mad Money" host says.
- "If you want stock market exposure, the best way to get it is with index funds, index funds, and more index funds," he says.
Investors must be aware of potential rewards and beware the potential risks when buying a stock because anything can happen on the stock market, CNBC's Jim Cramer said Thursday.
There are five current events that illustrate the "perils" of individual stock picking and why shareholders must have a strong stomach, he said. From the top plane manufacturer to the top social media platform to the divided politics across the pond, negative news can change the direction of an equity in a matter of seconds.
"I'm going to give you five reasons why it's so hard to make money in the stock market ... [preparing] you for the inevitable pain that comes with owning individual stocks," the "Mad Money" host said. "These have all snuck up on people, making them queasy. If the thought of them scares you, then you might want to rethink how you invest your money."
There are many advantages in owning stocks, but index funds provide the best market exposure, he said.
Boeing BA 's stock has had strong momentum growing double digits in 2019 with unforeseen risks. That is until its 737 Max jet was involved in its second fatal plane crash in less than five months.
Cramer said the 737 airplane was the main driver of Boeing's growth, but now the stock has plunged 49 points in a matter of days. Questions are swirling whether Boeing will be liable for the accidents and shareholders would have to be willing to swallow a lot of pain, he said.
If investors can't handle this pain, "you may want to stick with index funds," Cramer said. "I think Boeing will ultimately get through this, but in the near-term I honestly don't have a clue."
The dollar stores have been one of the best moves an investor can make this era, Cramer said. Dollar General DG was one of those stories, until the company projected profits will fall short of Wall Street's expectations this year, he said.
The discount retailer announced it needs to spend more money on its stores to attract customers, an investment in "some important strategic initiatives that nobody I know saw coming," Cramer said.
The stock fell 7.5 percent in Thursday's session before closing down less than 2 percent. The stock is worth buying at its levels if you accept that it may be downgraded by analysts on Friday, he added.
"Yesterday Dollar General was a market darling. Today it's a market goat," Cramer said. "If you want to own individual stocks, you need to be prepared for this kind of move, because sooner or later it will happen to you—it is inevitable."
Johnson & Johnson
Cramer ranks Johnson & Johnson JNJ among his favorite stocks, especially under the leadership of CEO Alex Gorsky. He said the company has, perhaps, the best balance sheet out of any company including a "fine dividend and excellent buyback."
Johnson & Johnson lost a $29 million lawsuit Wednesday to a cancer patient that alleged one of its products contained asbestos. There are many other related cases in the works against the pharmaceutical giant.
Shareholders owned the name because it's the "ultimate sleep-at-night stock," Cramer said, but the share price shed 1 percent on Thursday. The host considered shaving it from his charity trust.
"We now know that there will be the possibility, rightly or wrongly, for many more trial losses going forward," he said. "It's okay if it's just too much for you. Stick with an index fund where your losses in J&J may be offset by the other 499 other stocks in the S&P 500."
Cramer thought the worst was over for Faecbook FB , until a grand jury was called into the social media giant's data-sharing deals .
Questions are galore, but grand jury proceedings are secret and investors won't get any signs from prosecutors or the company. The host also pointed out that Facebook had a mass outage Wednesday and that Chief Product Officer Chris Cox is leaving the company .
The stock is sank more in after-hours trading.
"Looks like there's a lot more risk here than I thought. Maybe it all stems from privacy concerns," Cramer said.
Brexit has made it tough to own stocks, Cramer said. British lawmakers voted to delay its March 29 departure from the European Union by three months, which must be agreed to by EU officials.
Cramer said he learned that a hard exit from the union could cause major food supply disruptions in the U.K. within five days, if it were to happen.
"On the one hand, who wants to own stocks when we need to worry about food riots in London? On the other hand, if the market gets hammered because of Brexit [fears] that turns out to be unfounded ... then you may end up wishing you'd used some of that weakness to do some buying," Cramer said.
"If you want stock market exposure, the best way to get it is with index funds, index funds, and more index funds."
Disclosure: Jim Cramer's charitable trust owns shares of Johnson & Johnson and Facebook.
Questions for Cramer?
Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram
Questions, comments, suggestions for the "Mad Money" website? email@example.com
More From CNBC