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Are influencers giving bad investing advice?

Are influencers giving bad investing advice?

Social media influencers might be promising ways for you to get rich quick, but it's better to be safe than sorry 

It pays to keep a clear head when saving for your future but too many are now investing under the influence, after picking up tips and advice from unreliable sources on social media.

Instagram "influencers" are promoting a get-rich-quick investment culture by encouraging young people to gamble on bitcoin, internet meme stocks like AMC and GameStop, and other high-risk assets such as non-fungible tokens (NFTs) and foreign exchange. These self-appointed, unauthorised financial "experts" are all over Instagram, Facebook, Reddit, TikTok and other platforms, flaunting their luxury lifestyles and claiming you can make fast money, too. But this isn't investing, it's gambling.

If you fall for their tall tales of overnight fortunes and instant millionaires, you could end up losing the little money you do have.

"But this isn't investing, it's gambling"

No platform

Social media logos

Financial regulators are increasingly concerned, and even social media platforms are waking up to the problem. Google is set to ban financial promotions from unregulated firms in the UK, while TikTok is also tightening up. It won't be easy to get rid of the influencers, though, so stay on your guard.

Get rich slowly but surely

Cubes aligned in a diagonal way with arrows pointing up

The truth is that investing for your future is boring, if you do it right. It involves building a balanced portfolio of shares, bonds, cash, property and gold, using a tax-free vehicle such as a Stocks and Shares Isa or personal pension.

You then sit back and leave the money to grow, while reinvesting any dividends or interest back into your portfolio. This takes time, but it works. Say you invest £250 a month at age 25 and increase your contribution by 3% a year. If your money grows as an average rate of 6% annually, you will have a whopping £744,510 by the time you turn 65.

Stock markets can be volatile in the short term, but if you spread your risk across different companies, sectors and countries, it is far from a gamble.

"The truth is that investing for your future is boring, if you do it right"

You can’t trust these people

By contrast, second-guessing crypto currency or foreign exchange movements is basically a punt, like betting on who’ll score the first goal in a football match. Your trades are more likely to fail than succeed, and the influencers don't tell you that.

You cannot trust their motives, either. Many are flogging expensive training courses that don't teach you anything you can't pick up on the internet for free, or generate commission by encouraging followers to trade on investment apps. The influencers may make serious money, but you almost certainly won't.

Take the long view

A row of hourglass clocks

The scariest thing of all is that many borrow to fund their day trading, and process known as "leveraging". This means they are gambling with money they do not have, with many ending up in debt. So, forget the influencers and other unauthorised online tipsters, who like to flaunt their gains but never admit to their losses.

The reality is that you will almost certainly will never get rich quickly by gambling. If you invest instead, you should get rich slowly. That may not be as exciting but in the longer run it will be a lot more satisfying.

"You will almost certainly will never get rich quickly by gambling"

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