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The dangers of investing following some TikTok tips (and how to avoid them)

Date: April 21, 2024 Time: 19:48:42

In the digital age, social networks have become an inexhaustible source of information, inspiration and, sometimes, influence on our life decisions, including financial ones. TikTok, with its growing popularity (especially among Generation Z), has emerged as a platform where influencers share investment tips and strategies, often promising high returns with little risk. However, investing in these trends can compromise the financial health of investors.

Above all, because when we talk about investment, the quality of the information can itself be a risk factor. According to the recent report ‘The appeal of Finfluencers: Investing in the Age of Social Media’ carried out by CFA Institute, currently 36% of financial posts on TikTok include promotions and 32% are direct investment recommendations. A risk, if we take into account that 45% of these recommendations are merely indicative. That is, they are not verified or substantiated information about investment.

Furthermore, this is a growing problem specifically on TikTok, which in recent years has attracted a wide range of content creators. These influencers use the platform to share tips, quick investment strategies, and testimonials of success. TikTok’s short, highly visual format facilitates the dissemination of simplified messages that often omit the risks and complexities of investing. Therefore, how to identify the risks associated with this type of advice?

1. Lack of customization

Investment advice on TikTok is often generic and does not take into account viewers’ individual financial circumstances, long-term goals, or risk tolerance. What works for one person may not be right for another, potentially leading to detrimental financial decisions. If you see messages that are too vague, become suspicious.

2. Unverified information

Not all financial influencers on TikTok have the credentials or experience necessary to offer financial advice. The platform lacks an effective system to verify the accuracy of information shared, meaning users may be exposed to erroneous or misleading advice. Therefore, it is advisable to verify any information.

3. Promotion of high-risk investments

Some content on TikTok tends to promote high-risk investment schemes, such as volatile cryptocurrencies or small-cap stocks, without adequate warning about the risks involved. These investment vehicles can offer high returns, but they also carry a high possibility of loss, especially for novice investors. A good system to better understand the risk level of any operation is to follow this OCU manual.

4. Call effect

The virality of certain investment tips or trends can create a rally effect, where investors follow others without doing their own research.

5. FOMO (fear of missing out)

The fear of missing out on a ‘unique’ investment opportunity can be exacerbated by testimonials of success and quick profits. This can lead to impulsive decisions and investing in financial products without a proper understanding of the risks. Therefore, it is about seeking more information on the Internet or through specialists about this supposed golden opportunity.

How to invest safely and consciously

In any case, as prevention is always better than cure, the best way to invest safely and consciously is to follow a series of simple steps.

Financial Education: The first line of defense against the dangers of following impulsive investment advice is financial education. Understanding the fundamentals of investing, financial markets, and risk management can help you discern between solid advice and misleading offers. Do your own research: Before making any investment, it is crucial to conduct thorough research, considering reliable and diversified sources. This includes reviewing financial reports, understanding the business model of the investment, and knowing the specific risks involved. Consult professionals: For significant investments or long-term financial planning, consulting a certified financial advisor can provide personalized guidance and strategies. based on in-depth financial analysis.Diversification: Portfolio diversification is a key strategy to mitigate risks. Investing in a variety of assets can help protect against losses on any individual investment. Long-term perspective: Taking a long-term perspective and resisting the temptation to chase quick profits can result in a more stable and profitable investment strategy. Patience and discipline are essential for financial success.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.
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