If you had $1,000 (or less) to invest anywhere you wanted, what would you do with it?That's a question that's pretty common these days, since the stock market seems to be on everyone's mind. As well it should be. Recently, the market's not been a friendly place for new or seasoned investors, slashing the value of most peoples' portfolios. Despite the way the market's been moving, there are still investment moves to be made and gains to be had. If you would have put money in Global Payments ( GPN) on Friday, you'd be sitting on 20% gains. Investing in General Growth Properties ( GGP) the same day would have brought you almost 30%. There's certainly money to be made in this market, but only if you avoid the pitfalls many new investors face.
Decisions, Decisions"Playing $1K" is something that I had the chance to do myself when I was a new investor at just 18 years old. As crazy as it sounds, I had been following the stock market since I was 11 years old, learning and "paper-trading" for some decent gains along the way. I was obsessed with knowing everything I could about investing. And when I really wanted to learn something, I didn't pick up one of the "get rich quick in the market" books. Instead, I got a copy of the NASD Series 6 Exam Guide. So when I turned 18, I got a gift I didn't expect: a $1,000 check from my grandparents to invest as I saw fit. At the time, $1,000 was probably the largest amount of money I'd ever gotten at once, so seeing that number was no small shock.
Fixing for the FutureIf my story tells you anything, it should be to think carefully about the size of your positions and the strategy you undertake. When you buy small quantities of stock, you're basically handicapping yourself because you'll need higher returns just to break even. While 8.5% makes for a decent return for most, 8.5% would have left me with zero profits. The same is true of knowing your strategy. Diversification isn't a good move if you're a teenager who wants to play some risky stocks for big gains; it limits your upside potential. Likewise, putting all of your eggs in one basket is a very bad move if you're planning your retirement. The lesson here: Use a strategy that's tailored to you, not the other way around. Cramer: Strategy for Young Adults (Video, Sept. 30) If you have a longer time horizon, here are your opportunities, says Jim Cramer. To watch the video, click the player below: