These fractional stocks, not GameStop, can outdo hedge funds

Stock in GameStop and AMC found another leg to run on Wednesday, posting their strongest day of trading since an internet-fueled short squeeze sent their share prices to the stratosphere last month.

AMC shares closed 18% higher at $9.09 and GameStop more than doubled to settle at $91.70 weeks after a so-called “meme stock” frenzy cooled off. Retail investors got behind a basket of recommendations on the Reddit forum Wall Street Bets in hopes of exposing an unusually high short interest by hedge funds in a number of stocks.

While the rally was short-lived, CNBC’s Jim Cramer on Wednesday advised that young traders taking advantage of commission-free transactions on brokerage apps like Robinhood should rely less on speculative trades and get back to the basics of investing.

“If you really want to beat the big institutions at their own game, you don’t do it with GameStop and AMC. You do it with fractional shares and you do it right,” the “Mad Money” host said. “The $500 Club … is how you make real wealth.”

The comments come after the major U.S. averages also compiled their best day of trading in weeks. The Dow Jones Industrial Average added 424 points to reach a new closing high of 31,961.86, up 1.35% from Tuesday. The S&P 500 and Nasdaq Composite both closed about 1% higher.

While individual investors continue to take cues from Reddit to flood into stocks like GameStop, Cramer warned against the dangers of groupthink in the market.

“At the end of the day, this is not a team sport,” Cramer said. “Instead of chasing these risky meme plays, instead of getting impaled on a squeeze going wrong, why not try long-term investing?”

After the market closed, Cramer name dropped 12 proven stocks that are trading above $500, a price tag that is typically out of reach for investors who lack a lot of capital to put to work. Thanks to fractional shares, where a portion of a stock can be purchased, high-dollar stocks like Amazon or Chipotle may not be too far out of reach, he added.

“Some of [these stocks] are still off their highs, even after today,” the host said. “I want you to pick three and start buying.”

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