Lately Jim Cramer has heard a lot of chatter surrounding the concept of single stock risk. It's the risk that anyone takes when investing—what if you buy the wrong stock, and it gets totally clobbered? Should you avoid buying individual stocks all together?
"If you think that I scoff at single stock risk, you're wrong," the "Mad Money" host said. (Tweet This)
The risk behind investing in individual stocks is exactly why Cramer has always advised investors' first $10,000 in savings must be invested into an index fund. This way you will have the ability to capture the American stock market progress in a way that is diversified, as with a fund that mimics the S&P 500.
There is one particular element of single stock risk that really bothers Cramer, though. And that is when an investor has to miss out on the performance of an amazing stock because they think it is too dangerous, or they think that they can't do the homework to decide whether the company is worth investing in. Hogwash!
"The people who warn you against owning individual stocks often make this whole business sound like it is too hard," Cramer added. (Tweet This)
So with this in mind, Cramer thinks there are tons of opportunities out there for investors to capitalize on. Cramer loved the story behind GoPro, as the semiconductor company Ambarella that makes the brains behind GoPro confirmed that it has a ton of commercial drone work coming. Cramer thinks Ambarella can still go higher, even after its amazing gain Wednesday.
As long as you buy the stocks of companies you like and pay attention to them, the reward you will get is far better than if you just dumped your money into a sector basket ETF that includes the good, bad and the ugly of the stock market.