These days, even financial advice has jumped onto the social media bandwagon. No more queuing in office waiting rooms to get an inside scoop on investment strategy. Just log into social media and get hit with a slew of 10-second, rapid-fire investment tips from someone who says they’ve done this exact thing themselves and gotten rich from it. It feels so immersive. It feels so immediate. It feels so trustworthy. But is it legitimate?
Whether your receiving financial guidance from an influencer on TikTok or buying into stock market schemes developed on Reddit threads, risk is always involved. In fact, way more risk exists in this type of situation than in tradition avenues of financial advice. Despite this, you feel much closer to the source when you’re getting your financial insights and strategy from the internet. There’s a sense of immediacy and connection with the creators these financial tips and strategies. This creates trust. However, these channels of investment advice are lacking the safety measures that exist in a traditional relationship between a financial advisor and their advisee.
When you act on the advice given on a TikTok snippet or a Reddit sub-thread, you’re just acting on someone else’s word that it will work out. There’s no fact-checking or accountability involved. There’s nothing stopping a Reddit campaigner from advising one thing while actually doing the opposite. There’s nothing stopping a TikTok content creator from hyping up the potential in an investment when the reality is quite different. For social media stars, there’s always the temptation to create expectations that aren’t grounded in reality. When it comes down to it, these social media influencers are aiming for likes, follows, and a platform where they can express their ideas. They gravitate towards the wow factor and the flashy headline. Their primary motivation is views and clicks, not long-term clients that come back for advice year after year.
Even if a TikTok guru or Reddit millionaire has actually achieved financial success by practicing their own advice, that doesn’t mean you can do that too just by following their lead. It’s impossible to know how much of their success was down to just plain luck. There needs to be alignment between many moving parts for a speculative investment to produce huge profits. That just doesn’t happen very often. And luck is the only proven explanation for it ever happening at all.
For every success story that catapults a day-trader to fame and wealth, there are thousands of other people who did very similar things and lost everything they’d invested. You’re risking a lot by taking the advice of an individual you know very little about and betting a lot of money on a stock based on what they say. The videos and real-time strategies you see playing out on the internet might seem insightful, immersive, and guaranteed to succeed. But because there’s so much happening in a market that can’t be controlled, even the most watertight day trading strategy has a very low chance of actually succeeding.
Of course, the alternative to absorbing financial advice from the internet isn’t as exciting. Listening to financial advisors talk about hedge fund options for retirement accounts isn’t as glamorous as watching a video saying you’ll make millions in weeks just by following their advice. But this is the reality of investment. The less exciting an investment is, the less risk is in it. Risk essentially equates to losses in the long-term game of investments. Reducing risk is the key to cultivating a reliable portfolio of long-term investments that ensure financial stability. And sitting across the desk from a real person is the best way to get the information you need to begin making smart investments that build your equity for the future.