The dangers of receiving financial advice on social media

Social media platforms give us access to vast amounts of information. However, can we be sure that it’s credible? Scammers and fraudsters have free reign to take advantage of unsuspecting users by providing false financial advice, which, if followed, can be detrimental to your monetary wellbeing, especially if you’re considering beginning your financial investment journey.

It’s vital to be wary of any online financial investment content that ‘promises’ high returns in a short amount of time. It would be best if you took financial advice from qualified independent financial advisers.

Recently, many videos have appeared on Tiktok with hashtags including “Fintok,” “Moneytok,” “financetok” or “howtoinvest” offering pieces of advice containing all the buzzwords that you would want to hear such as “retire a millionaire” and “the one stock that could make you incredibly rich”.

In most cases, the individuals or groups producing these videos are scammers with no financial qualifications who often over-simplify complex financial processes, manipulating you to invest in fake funds. The pandemic has caused one of the most challenging economic periods in history and taught us the importance of making informed decisions about investments and saving.

The luxury of time can be the most significant advantage for young investors. By investing as early as possible, ideally, once you’ve started earning a stable income, you can reap the rewards of compounding on your investment to help you build real wealth.

Here are some expert scam-proof tips and red flags for young investors.

Four tips to prevent fraudulent investment advice

  1. If an investment requires you to recruit other investors to receive a return on your investment, it’s called a pyramid scheme (also known as tiered investments.)
  1. Be cautious if the investment doesn’t specify how it earns returns. Do you know the underlying assets in which you’re investing? E.g. If the fund has a high percentage of assets in equity, you can likely expect market fluctuations, and it is likely to only provide you with returns over the long-term, which may be too risky for you. Investment funds such as unit trusts have mandates and factsheets that should be readily available. They explain exactly how the fund works.
  1. Scammers don’t want you to spend time researching the investment opportunity, and therefore you’ll usually find there’s a time limit in which to invest. Also, be very wary of phrases such as a “once-in-a-lifetime opportunity”.
  1. If the investment isn’t registered with a financial body such as the Financial Sector Conduct Authority, it means it’s unregulated – this is a big red flag. You should also contact financial bodies to verify the registration of any financial entity that is reasonably new.

Keep this motto in the forefront of your mind when it comes to investing: If it seems too good to be true, then it probably is. Always trust your gut feeling(s) – it will help you avoid long-lasting capital loss. Always consider expert advice. Speak to a qualified independent financial adviser who can provide you with knowledge about whether investing in a particular fund is financially safe.


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