Cramer’s guide to investing your stimulus check in the stock market

With millions of Americans set to receive another round of stimulus checks from the federal government, CNBC’s Jim Cramer on Monday advised investors on how to put that money to use in the stock market.

First, Cramer urged, pay off bills and take care of other necessities. But after that, Cramer recommends market newcomers put most of what’s left into a cheap index fund that mimics the S&P 500.

“Once you put enough money away in a cheap index fund, you can start thinking about your discretionary ‘Mad Money’ portfolio, but before you start picking stocks, you need to figure out what level of risk you’re comfortable with,” the “Mad Money” host said. “Once you know that, you’ll likely do much better in the long run.“

Stocks traded higher Monday, with the Dow Jones Industrial Average adding almost 175 points to reach 32,953.46, up 0.53% on the session. The S&P 500 advanced 0.65% to 3,968.94 and the Nasdaq Composite outperformed to rise 1.05% to 13,459.71.

Conventional wisdom says an investor’s approach to stocks should be guided by one’s age and tolerance for risk: Younger investors tend to have a longer horizon to reap the rewards of an asset with near-term risks. Older investors who are at or nearing retirement age are less inclined to take on risk.

Cramer’s general rule for investors is to invest at least $10,000 in an index as retirement savings before searching for individual stocks to own.

“The younger you are, the more I’m begging you to take an aggressive stance on something speculative,” he said. For more senior investors, “I think you’ve got to try a stock like Johnson & Johnson, a company with a long track record of paying dividends.”

For investors with high-risk tolerance, Cramer points to:

For investors seeking less risk, Cramer recommended these picks:

Disclosure: Cramer’s charitable trust owns shares of JP Morgan, Salesforce, Microsoft, Mastercard and Ford.

Disclaimer