Cramer believes “ETF-ization” happened because people shied away from individual stocks, which all but lost their appeal before optimism about President Donald Trump’s policies fueled a further rise the bull market beginning in November.
Yet owning an ETF does not automatically guarantee profits or safety from broader market trends, despite the number of ETFs set up to take advantage of them.
“If you think you can’t pick the best of these stocks, then I would suggest that you might not know enough about the sector to begin with, so don’t think you can outsmart it by picking an ETF,” Cramer said.
The “Mad Money” host made an exception for GLD, an ETF that tracks the price of gold, because of its accuracy.
On a larger scale, however, Cramer said that ETFs have the power to distort stock valuations too dramatically for his liking.
“At the end of the day, I’m against ETFs because they often create enormous distortions that can obliterate even the best of stocks,” Cramer said. “You have to accept a lot more risk if you own a stock that’s particularly hostage [to] a given ETF.”
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