Jen Glantz
Going on TikTok for an hour or two every night has become my new favorite ritual. I find myself watching short videos on so many different topics, from cooking to styling clothes, makeup tutorials to learning about the latest books to read. It truly has become a source of entertainment, inspiration, and advice.
Lately, I've been finding myself watching TikTok videos from people, without knowing their credentials, who are sharing financial advice. Since these videos pop up on my feed quite often, I find that five to 10 times a night I watch videos sharing tips on investing, retirement funds, paying off debt, and so much more. I began to wonder how valid some of this advice is and whether or not professionals would recommend some of these tips.
That's why I reached out to a handful of financial planners to get their opinions on some of the financial advice videos that have made their way onto my TikTok feed.
1. Invest in cryptocurrencyA lot of the financial videos I find myself watching on TikTok are about cryptocurrency. I haven't invested in cryptocurrency yet, but the more I watch these videos the more I'm tempted to put money into some of the smaller cryptos that people are talking a lot about these days.
Financial planner Curtis Bailey says that, in his experience, most of the money advice he's seen on TikTok isn't good. In the case of my crypto temptation, Bailey says it's important to remember some of these videos leave out key information, provide wrong information, or encourage taking a substantial risk.
"I encourage people to find sources that they will read or follow, and then take the time to do the homework. Does this idea have sound investment merit (e.g. profits), or does it sound more like a get-in and get-out idea? How does this fit within your financial plan and asset allocation? Investing in riskier investments does make sense for people striving for higher returns, but it should not be the only approach they use," says Bailey.
2. 'Do this and get rich'The videos I can't seem to stop watching are the ones that share tips and tricks on how to get rich quickly. I know I should scroll past these and not give them too much of my brain space, but the advice given does make me think about whether it could be worth trying.
Brian Walsh, a financial planner, advises being wary of any accounts or videos that promise their advice (whether on investing, passive income, or other money hacks) will help you get rich overnight.
Walsh recommends doing research on any of these approaches and remembering the risks and challenges that can come with making a snap investing decision.
3. Mimic top holdings from actively-managed fundsI consider myself a rookie investor, so I spend a lot of time watching TikTok videos that share how to manage investments to get the best returns for myself.
But that advice often promises false guidance that can be tricky to follow.
Walsh says that he often sees TikTok videos on the idea of mimicking the holdings of top-performing funds. While it might sound like a smart idea because you think you're following an expert's advice, that's not the case.
"Past performance of active managers does not predict future performance, and in fact most actively managed funds actually underperform their benchmarks," says Walsh. "Second, top-performing active managers seldom stay that way over time. Third, the holding data active managers release is dated by the time you see it, so you would essentially just be following what they did likely at different prices and technical factors."
4. Buy the stocks other people are buyingI often have an intense sense of FOMO (fear of missing out) when I watch TikTok videos where the creator is sharing how everyone who's anyone in the investing world is buying a particular stock. It makes me wonder if I should follow what other people are doing (especially when those people are well-known investors, company insiders, or even famous people).
Walsh says that while that advice might seem appealing, you should be extra careful about making an investment decision based on just that information.
"Simply buying or selling a stock because a famous person does it doesn't mean it's effective," he says.
Walsh explains that their strategy might be different than yours (in terms of risk tolerance, goals, or financial planning in general) so don't be so quick to follow someone else's lead just because you heard about what they are investing in on TikTok.
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