After the S&P 500 knocked three stocks from its ranks last week, CNBC's Jim Cramer told investors why it's usually not a good idea to stick with these companies.
The S&P 500 evaluates the performance of roughly 500 of the largest publicly-traded stocks and is seen as a bellwether for the market."When you see a stock that gets expelled from the S&P 500, please don't bother to try to catch a bottom— you're most likely catching a falling knife," he said."Historically, the odds are very much against you. If Standard & Poor's doesn't want them, well, you probably shouldn't want them either.
Although buying an index fund is usually considered passive investing, Cramer said the S&P 500 is more actively managed than many realize. "The team at S&P Global does a fantastic job of deciding which stocks to add and which stocks to subtract — that's one of the reason's why I'm so comfortable with telling you to put a big slug of your savings in an index fund that mirrors the S&P," he said."There's nothing passive about kicking out the weak and adding the strong."
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