Review of Jim Cramer’s Action Alerts Plus (Not Worth It)

Sign Up for Action Alerts Plus:

Key Points:

1. Action Alerts Plus returns (with dividends) underperform those of the S&P 500, and even more so when dividends from the S&P 500 are factored in. From 2002 to 2014, the S&P 500 with dividends has a median return of 13.52% per year; during that same time period, the median return for Actual Alerts Plus is 7.05%. AAP outperformed the S&P500 with dividends in 6 years from 2002-2014, and underperformed in the other 7 years.

2. AAP also has experienced significant drawdowns. In 2008, AAP declined 37.67%; in 2002, it was down 19.79%. The standard deviation of annual returns for AAP from 2002-2014 was 20.13%, slightly greater than the S&P 500 with dividends standard deviation of 19.26%.

3. The AAP fund currently has 28 stocks in its portfolio at the time of this writing. Cramer recommends entering in tranches and generally holds positions for a few months or years. This approach can result in several hundred trades being placed per year, and thus subscribers who intend to take all the signals given should be prepared to be capitalized accordingly – which may mean a capital base of around $100,000. Traders with less than that may wish to be more selective regarding what trade recommendations to take. Cramer does use a grading system to rate stocks that helps traders who do not intend to take all trades identify the ones that Cramer regards as “the best of the best” and most worth purchasing.

4. The fund relies exclusively on fundamental analysis. No short positions are taken.

5. In addition to signals, AAP subscribers are provided with other free content, including much about the theory and principles behind Cramer’s method.

6. AAP offers a two week free trial. However, it does require users to provide their credit card information, and if the user does not cancel prior to the end of the free trial, a subscription automatically begins. [b]Users must call to cancel.[/b]
Personally, I was not very impressed by AAP. It is not a service I would use or recommend.

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