Jim Cramer has always had the notion that excessive prudence can be one of the most reckless strategies of all.
If too much money is invested in safe, risk-free U.S. Treasury bonds, that basically insures a very low return on an investment. So, for those who want to grow their capital, stocks are the only game in town.
Stocks are a tool to make money, Cramer said, and bonds are for capital preservation — for protecting money and providing a small, steady return that can offset the impact of inflation.
"Depending on how old you are, there is a huge difference in how you should approach the very idea of putting your money in bonds," the "Mad Money" host said.
How much of a retirement portfolio should be kept in bonds versus stocks? Cramer broke it down by age:
- 20s: None
- 30s: 10 percent of your retirement fund; 20 percent if you are conservative
- 40s: 20 to 30 percent bonds
- 50s: 30 to 40 percent
- 60s: 40 to 50 percent
- Post-retirement: Increase bond exposure to 60 to 70 percent