Jim Cramer of CNBC made an appeal to young investors who are new to the stock market and want to develop long-term wealth on Friday. “I’m telling all these younger investors who are flirting with options to please listen up: I’m begging you, just buy something, own it for the long-term,” said the presenter of “Mad Money.” “If that’s all you can afford, buy two or three shares every month. That’s how I got my start.
If you reinvest your dividends over time, you have a good possibility of generating a lot of money.” Cramer’s remarks come a day after Robinhood, a brokerage app, released its fourth-quarter earnings.
The investment app, which is popular among millennials, brought in $264 million in transactional income. Investors with options have the option to purchase or sell a stock at a fixed price in the future, but not the responsibility to do so. CNBC reported in December that options activity achieved new highs in 2021, thanks in part to their growing popularity among ordinary traders. Cramer was particularly concerned about the prospect that some novice traders might only trade options.
“If you’re purchasing call options in this difficult moment, pieces of paper that allow you to boost your returns by taking on a tonne of extra risk without actually having an advantage, you’re definitely losing a lot of money, especially in the last 10 days,” says Crammer.
According to Cramer, a better long-term plan for young investors is to invest in genuine equities. “Rather than playing with options on Robinhood, you should be sitting tight in a high-quality company like Apple, maybe gaining more when others sell,” Cramer added.