Always Ignore Investment Advice on Social Media – Here’s Why

Only certified professionals with years of track record gave financial advice in the past. But now? Almost everyone on social media has become a financial expert, and many of them are actually scammers and fraudsters, with a good number of others not knowing exactly what they’re saying or suggesting.

According to the FTC, social media accounts for 25% of people who have lost their hard-earned money to fraud since 2021. We’re talking around $2.7 billion here.

The FTC also reports that since 2021, social media has become the biggest tool for investment scammers, with hard-working people losing money just by listening to bad financial guides.

You’ve probably encountered these social media influencers, or “fin-fluencers,” before. They scam their followers with numerous posts, videos, and tweets offering “guaranteed” ways to make money or promising unrealistic investment returns.

While it may be tempting to follow their advice, especially when it comes from influencers you have known for a long time or those with large followings in the millions, it’s essential to go through this post first to see why you should always be skeptical of financial advice on these platforms.

Lack of Accountability

When you scroll through your social media feeds, you’re bombarded with financial tips and tricks from various sources. Nevertheless, unlike licensed financial advisors or regulated institutions, these social media personalities have little to no accountability for the advice they give.

If you follow their suggestions and lose money, there’s often no recourse available. You must understand that real financial experts are bound by strict regulations and ethical codes, unlike these “fin-fluencing” scammers.

They can face severe consequences for providing misleading or harmful advice. Yet, on social media, anyone can claim to be an expert without facing such repercussions.

One-Size-Fits-All Approach

Financial suggestions online are often generalized, ignoring the fact that every individual’s financial situation is unique.

What works for one person may not work for you, and blanket statements about investments can be dangerously misleading.

Your financial goals, risk tolerance, current financial situation, and long-term plans are all factors that should be considered when making investment decisions. A tweet or TikTok video cannot account for these crucial individual differences.

Pump and Dump Schemes

One of the most prevalent frauds on the internet is the “pump and dump” scheme. The PRC reports that cryptocurrency scams have now grown to be a major concern in the United States, and it’s all because of big influencers on social media platforms.

These influencers artificially inflate the price of a stock or cryptocurrency by heavily promoting it on their handles. Once the price shoots up due to increased demand, they sell their holdings at a profit, leaving unsuspecting investors with worthless assets.

According to Silver Miller Law, a renowned crypto scam lawyer based in Coral Springs, Florida, you need to be especially wary of posts that urge you to buy a particular cryptocurrency immediately, claiming it’s about to “explode” in value. These are often attempts to manipulate the market at your expense.

Lack of Proper Research and Analysis

Many influencers who give financial advice lack the proper education, experience, and resources to conduct thorough market research and analysis.

They often base their recommendations on superficial information, personal biases, or speculation.

You must understand that sound investment decisions require in-depth research, analysis of financial statements, understanding of market trends, and consideration of various economic factors. This level of detail is rarely, if ever, present in a fin-fluencer’s post.

Conflict of Interest

Influencers often have hidden agendas when giving you investment advice. They may be paid to promote certain stocks or financial products or hold significant positions in the investments they’re recommending.

This creates a clear conflict of interest that can lead to biased and potentially harmful advice. This is why you should always question the motives behind the investment advice you see online. Is the person genuinely trying to help, or are they looking to benefit at your expense?

The Illusion of Expertise

Online platforms allow anyone to present themselves as an expert, regardless of their qualifications.

A well-produced video or a series of confident tweets can give the illusion of expertise, even when the person has no fundamental knowledge or experience in finance and investing.

So, watch out for financial influencers who claim to have discovered “secret” investment tricks or boast about their success without providing verifiable evidence. Real financial experts are typically more measured in their claims and willing to discuss different investment strategies’ potential risks and rewards.

Lack of Context

Online posts are often brief and lack the necessary context for making informed investing decisions. A single tweet or short video cannot possibly convey all the information you need to understand a complex financial product or investment strategy.

What you need is comprehensive information on the investment you’re planning to make, including its risks, potential returns, historical performance, and how it fits into your overall financial plan. Influencers or scammers rarely provide this level of detail.

Herd Mentality and FOMO

Influencers know how to create a sense of urgency and fear of missing out (FOMO) regarding their pump-and-dump projects.

You might see posts about people making huge profits from a particular cryptocurrency and feel pressured to jump in before it’s “too late.”

This herd mentality can push you to make bad decisions that could result in significant financial losses. This is more reason to make investment decisions based on careful consideration and research rather than the fear of missing out on a trending opportunity.

Lack of Personalized Advice

Every investor has unique financial goals, risk tolerance, and life circumstances. Generic advice on social media cannot take these individual factors into account.

What might be a good investment strategy for a 25-year-old with a high-risk tolerance could be completely inappropriate for a 60-year-old nearing retirement.

It would be best to receive personalized advice that considers your specific financial situation, goals, and risk profile. This level of customization is not possible through online influencers.

Wrapping Up

While social media apps are a great tool for many aspects of our lives, they’re also filled with scammers trying to steal your money.

There are reputable financial advisors on these platforms, too, but you have to be willing to research their handles because they’re not influencers and may not be trending every single day on the app.

So you must search for them, follow them, and make your financial inquiries with them (though it might not be free), but you can still benefit from their regular posts and guidance.