Mad Money Mailbag: Getting Into the Market

Cramer answers viewer email on short-selling and a minimum investment.
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Editor's Note: The following are questions received from viewers of "Mad Money," seen every day at 6 p.m. EDT on CNBC.

I have the basic idea behind selling short, but am not sure when and how to do it. Can you help?-- David from Dallas

James J. Cramer:

First, note that I am currently not allowed to short stocks because of my trading restrictions.

Second, make sure you're clear: Instead of buying a stock because you believe it will move higher, you sell short stocks that you believe will move down in price.

Third, while the idea sounds simple, actually executing the strategy is far more complicated, because it requires using margin.

What is the minimum investment to start buying stocks?-- Elizabeth from Rhode Island

James J. Cramer:

In general, I believe that investors who are entering the market with less than $5,000 or $10,000 should concentrate their money in mutual funds.

This is for diversification reasons, though the relatively low commissions at discount brokerages have allowed many more individuals to enter the stock market in recent years.

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