- "Please be careful when you see a reference in Twitter which says we're taking up Hertz or get on board the Chesapeake train," Jim Cramer said.
- In recent days, traders have bid up the stocks of companies that have filed bankruptcy or are expected to do so soon.
- "Fractions is a great way for people to learn how to buy an Amazon or how to buy an Alphabet, so I just wish that they would switch the direction from companies that may be bankrupt or overvalued," Cramer said.
CNBC's Jim Cramer cautioned investors on Tuesday to avoid the risky stocks favored by day traders these days amid rampant speculation in the market.
"I've never seen so many games played with stocks, which is that, 'hey, we're taking this one up today. We're taking that one up today,'" Cramer said on "Squawk on the Street."
The market's amazing comeback from its March coronavirus low has led to excessive risk taking by many traders.
Along with retail investors trying to catch up to the rally, commission-free trading, the lack of sports and even stimulus checks from the Treasury Department being used to buy stocks have played a factor. Traders have even bid up the stocks of companies that have filed bankruptcy or are expected to do so soon. Cramer warned on Tuesday that many of those traders were likely to lose money in these trades.
"Please be careful when you see a reference in Twitter which says 'we're taking up Hertz' or 'get on board the Chesapeake train,'" Cramer said. "Because you're not going to be the one that makes the big money. You're likely going to be the one that loses the big money."
Instead, the "Mad Money" host said investors should look at buying fractional shares of larger, less-volatile stocks. Some brokerage firms now let users by fractions of a share, which makes its easier for less-wealthy investors to gain exposure to stocks with share prices that are in the hundreds or thousands of dollars.
"I want people very badly to be in the stock market. And how are they going to learn other than buying these small dollar stocks and thinking that that's how you make money," Cramer said.
"I don't want them to be blown out," he continued. "I do want them to understand that you can do small dollar stocks now like never before, it's just that you have to do it in fractions. And that fractions is a great way for people to learn how to buy an Amazon or how to buy an Alphabet, so I just wish that they would switch the direction from companies that may be bankrupt or overvalued."