- The TikTok hashtag “#investing” has racked up more than 2.8 billion views on the mobile video app as young people flock to the platform to learn more about the stock market.
- While there is a lot of useful information, there is also a lot of bad advice.
- Insider asked two financial experts to watch and review nine popular TikTok investing videos with questionable advice. Here is what they had to say.
- Sign up for our daily newsletter, 10 things before the opening bell here.
The investment side of TikTok, better known as “StockTok”, is exploding, with the TikTok hashtag “#investing” registering more than 2.8 billion views. Many videos tagged with #investing focus on investing advice, and newbie traders on the app have stated that they heed the advice.
Douglas Boneparth, 36, who provides investment advice to Millennials through his company Bona Fide Wealth, said he liked the increased attention given to the investment world via social media. But with the democratization of the stock market, there is a lot of misinformation and “cringe”.
“It can get loud and noisy, and if you follow the wrong thing, you can make mistakes that you really regret,” he said.
Insider asked three market experts for their opinions on nine popular TikTok investing videos with questionable advice.
Boneparth, along with Sam Stovall, chief investment strategist at CFRA, spoke to Insider for the story. Seven of the TikTokers did not respond to Insider’s request for comment, and two could not be reached via social media.
Kris Krohn, @kriskrohn, advised his 832,000 followers to avoid the “401K scam” in an August 2020 video. Krohn, known for his real estate investment advice, said that “maximizing your 401K could be the dumbest advice I’ve ever heard for anyone who wants to take control of their financial future.
“I admire his passion and love for real estate, but that is just plain incorrect in fact,” said Boneparth. “A 401k is not a scam, it offers tax benefits.”
Sam Stoval said the advice is only good “if you like to throw money away and believe in illogical conclusions”.
“Maximizing your company’s 401K game will earn you free money because the company will give you – for free – some or all of your contributions,” Stovall said.
Further, he said the stocks, which the 401K can invest in, have generated an 11% compound annual total return since 1946, not Krohn’s 1% claimed in the video. Retirement accounts can ensure “a substantial retirement nest egg”, he said.
The @ teen.executive account, which has 187,500 subscribers, said people can make a million dollars or more if they use soap and shampoo samples from hotels, saving around $ 45 a month and investing these savings in the S&P 500.
Stovall said that saving money where possible and investing that savings “is indeed helpful advice for becoming a millionaire when you retire.”
But “who spends $ 45 a month on soap?” Bonparth said, “and you still have to pay for the hotel room.”
Bonparth, who questioned whether the video was made as a joke, said pinching pennies on the little things was not the road to financial independence.
“Soap alone isn’t going to get you a million dollars here.”
Video: “I see a stock going up, and I buy it“
The couple at the @chadandjenny account told their 116,000 followers that they make money by buying stocks that go up and then selling at the top.
The video’s advice reminded Stovall of a humorous quote from the Great Depression to buy stocks “that go up, and if they don’t go up, don’t buy them.”
Bonparth said the couple were actually describing dynamic trading, in which investors have to time the market, which is “very difficult.”
“You can go wrong trying to trade aggressively and guess when the stock is going to go up or down,” he said.
From a constructive standpoint, the video “encourages novice investors to learn more about technical analysis, focusing on: detecting recoveries, following trends and overtaking patterns,” Stovall said.
Amid the resurgence of the memes stock mania around AMC Entertainment, the @atomcash account, which has 1,400 subscribers, said, “Mathematically speaking, it’s statistically possible that AMC could hit 100,000 per share. at $ 500 or even a million dollars per share. “
“There is a huge difference between being ‘statistically possible’ and ‘realistic’,” Stovall said.
At just $ 1,000 a share, the company, which is currently trading at record highs of around $ 45, would represent a $ 500 billion company.
“It is absolutely ridiculous to think that AMC, a company that is bleeding money and trying to consolidate its balance sheet and survive, would be worth a little less than Tesla,” Boneparth said.
The creator of @ceowatchlist regularly posts TikToks encouraging his 822,000 subscribers to follow the public investment records of CEOs, Senators and other wealthy people and buy what they buy.
That’s advice many investors are following, seeing how many attend Berkshire Hathaway’s annual meeting and read Warren Buffett’s letter to investors, Stovall said.
“However, one problem with buying what the rich have is that those rich probably don’t publish a newsletter about when to buy and when to sell, while also publishing a balance sheet,” Stovall added. “Therefore, blindly buying what the rich have means you can come in late and never know when to go out.”
Tik Tok Creator @ Chris.stocks explained to his followers what a support and resistance level is, and said that when you see a stock approaching its support or resistance level, you can predict what will happen next. spend and earn money.
“This is largely the basis behind technical analysts. ‘The trend is your friend until it ends,” said Stovall.
Boneparth said the video is a foray into using technical analysis for trading, but cautioned that the skill takes time to practice.
“There is no secret formula to getting rich,” Boneparth said. “I’m glad people are interested, but it’s not a long term investment. You just can’t watch this video and buy and sell.
In another TikTok video slamming retirement accounts, @ realitycheck2020 says investors shouldn’t use retirement funds because they charge fees while your money goes down in value. His solution is for investors to invest money in an S&P 500 index fund and then look for opportunities in new IPOs, cryptocurrencies and real estate.
Stovall clarified that most retirement accounts allow you to invest in the S&P 500 at low cost.
Bonparth summed up that this video contains “very broad financial advice from someone giving their opinion on asset classes.”
“It’s not backed up by any information that might help anyone. It all hinges on FOMO, a market that treats investors well for taking risks,” he said.
@tdorriz tells Tik Tok that investors can turn their $ 1,400 “stimmy” (stimulus) into $ 10,000 by purchasing PSPCs that are about to acquire a target business.
“If these target companies are good, these stocks will easily double or triple overnight,” @tdorriz said in a TikTok
Boneparth said this investor was mistakenly associating correlation and causation, and urged investors to do their own due diligence.
“To just go buy any PSPC and not understand is a disservice,” Boneparth said.
“This advice assumes that all SPACs make money. There is no guaranteed investment!” Stovall added.
A TikTok from @rickrahim tells investors to take out a low interest loan, “put it all in crypto” and take a tiny bit of profit each month to make monthly interest payments. Bonparth and Stovall both had strong reactions to this one.
“If he trolls, it’s very funny. If he doesn’t, it’s an extremely dangerous and borderline stupid idea,” Boneparth said. “Don’t start investing in speculative assets. The risk is not worth the reward. Very dangerous, terrible, terrible financial advice.”
“Anyone who thinks that a particular asset class is ‘always going up’ deserves to lose money,” Stovall said. “Plus, why make a possible mistake worse by taking out a loan (which has its own cost) to buy the investment you didn’t bother to research, or, worse yet, buying on margin?” you initially invested.
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