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Here’s how to wade through the quagmire of online money advice
Spend any time on TikTok, Reddit, YouTube or others
And you are sure to come across financial advice from one bar or another. Lots of qualified professionals share solid advice about their popular channels, such as Tiffany “The Budgetnista” Aliche and Soledad Fernández Paulino of Wealth Para Todos. But there’s also plenty of “tips” that you should ignore, overlook, or ignore — or at least ask for.
I recently spoke to Ann Lester about how to spot bad online financial advice. Lister is the former head of Retirement Solutions at JPMorgan, where she has worked for nearly three decades, and founder of the Aspen Leadership Forum on Retirement Savings. I left JPMorgan to focus on helping millennials and millennials save more for retirement and a good investment. Given that nearly 40% of Gen Zers say they learn about money from social media, Lester is working overtime to ensure young people start their retirement journeys on the right foot.
“I think there is some exceptionally sound advice,” Lester said. “But I also think there are some things, when I wear my JPMorgan hat, the hair on the back of my neck stands up because it’s so awful.”
She said there are two warning signs to look out for when you’re scrolling through financial advice online.
First: Anyone telling you to buy or sell anything in large, bold, and all typefaces
You should never buy or sell something just because the influencer tells you so. a period.
“Especially things like cryptocurrencies and individual stocks,” Lister said. “Some people are true believers out there pounding the table, but a lot of people – it’s a classic thing, talk about something you have a stake in and then quietly sell it behind the buyers. This has been going on for as long as there have been financial markets.”
She said that as an investor, you should be able to explain in simple terms why you are getting returns from something. For example, Company X makes a product that people want to buy. Over time, if the company is well managed, this is reflected in the value of the company.
Despite this, regarding cryptocurrencies, “I don’t see anyone who has made a reasonable argument why they should continue to rise in value,” she said.
Second: The ultimate blankets that “everyone” should follow
When you see blanket advice – like “Everyone should buy a house” – Lister said to question it. It may make sense to you, but no single financial decision – like buying a home – will be right for everyone.
Lister explained that for all financial advice there is a headline that is almost always true – ie you should save – but then it all depends on your situation. Yes, you should save, but how much you save, where to put your money, and what you’re going to save for will all depend on your specific scenario and goals.
“You should have your long-term savings, like retirement, and invest in a mix of stocks and bonds. That’s good advice. But after that, it all starts to count,” she said. For example, “One of the things I’ve seen lately is, ‘You should buy a house,’ or ‘You should never buy a house.’ Those are two terrible pieces of advice, because the real answer is: It depends.”
In the end, Lester’s recommendation is twofold: First, take time to question the money advice you’re consuming, and think about where it’s coming from. Most people who share this type of information make money in some way, either through clicks (which explains the big headlines! Sells.
“Young people don’t trust the ‘system’ very much because they see it being sold off all the time,” she said. “I think there’s a healthy degree of skepticism about that,” but I would point out that most people online have the revenue model associated with their online presence.
Earning money online is not bad in itself. But influencers should be transparent about their revenue models so you can consider their advice in context.
And her second recommendation: If it sounds too good to be true, it is. “You can always look at the one stock” that exploded and made early investors rich, like Apple or Tesla, Lester said. This will always be true. “But the truth is that this is not a sustainable or reliable way to make money.” With every “easy” way to make money, “work until you stop working.”
— Stephanie Hallett, Senior Editor at Personal Finance Insider
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