According to a recent report from the Financial Industry Regulatory Authority (FINRA), 61% of social media users and “finfluencer” followers aged 18 to 34 have made an investment decision based on recommendations from a social media personality — and these folks also reported “substantially higher fraud exposure and victimization.”
A lot of financial advice found on social media is worth what you paid for it — nothing. Here’s a look at several bits of advice I’ve run across that are simply wrong or misleading.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Stock market expectations
One social media pontificator said: “The stock market is one of the best tools to grow your wealth.” That’s very true. Over decades, it beats most other alternatives. They added that a 10% return doubles your money every 7.2 years, and a 20% return doubles your money every 3.6 years. That, too, is true — it’s the classic “Rule of 72.”
The problem, though, is the suggestion that you can expect stock market returns of 20% annually. The stock market has averaged annual returns of close to 10% over many decades, not 20%. There are some years with massive gains, and some with sharp drops. But overall, expectations should be tempered.
Social Security
One poster said that “Taking Social Security at 62 instead of 67 cuts your benefits by 30%. Forever.” That’s true, but the person went on to say: “That’s $500 less per month for the rest of your life.” That’s not necessarily true at all, because it depends on how big your benefits are. It’s also important to understand that starting at 62 instead of 67 means you’re collecting five more years of benefits — which can amount to a lot.
Investing goals
Another person asserted that a million dollars will generate $100,000 in income per year. Well, it could, but you’d probably run out of money well before you die. That’s taking 10% of your assets out annually, when they might only be growing by, say, 5% or 8%. A common guideline is to take out just 4% annually, more or less, for a good chance of having your money last 30 years.
This is a good reminder that most of us need to be saving and investing in earnest for retirement. For some, retiring with $1 million in assets will suffice, while others will want to aim for more — or less. Much depends on your expected expenses in retirement and how far away retirement is. You can invest for the long term rather effectively via a low-fee index fund such as:
