Broker Check

Financial Farce: Navigating the Circus of Bad Advice in the Social Media Age

January 05, 2024

Imagine this: a world where financial advice isn't just bad, it's so terrible that it's comedy gold. I’ve had a blast dissecting those cringe-worthy financial hot takes on social media. They're as captivating as a comedy skit gone awry—you just can't help but watch, even though it makes you cringe a little. 

Here’s the deal: bad financial advice comes in many flavors. Sometimes it’s outright wrong, while other times, it's just wrong for you, for now, or for any reasonable situation. And guess what? It’s often served up by folks more interested in their gain than yours. That’s why it is important to work with a fiduciary when you are getting investment advice. A fiduciary is an investment advisor that puts your needs above all else. That guy on TV giving out stock picks, his goal is to get more viewers. He can’t possibly know if it’s suitable for every viewer, and he’s certainly not a fiduciary.  

But wait, it gets worse. Enter social media—the breeding ground for financial fiascos. Our brains now run on 90-second video clips, leaving us with mere snippets of info, hardly enough time to judge the advice-givers or what they're peddling. Suddenly, everyone seems to drive a Lambo and bathe in cash while you're left wondering if you missed the memo on getting rich quick. Reality TV stars flash wealth, but let’s face it, not all of them are swimming in millions. Yet, it's aspirational, blurring what's real and what's rented.  

We have the millionaires next door stock trading. Ah, the gurus! They flash charts, jump with joy, and boast about making millions in minutes. They sell courses and subscriptions psychologically designed to entice you to buy them. But here's the truth: successful traders aren’t trying to sell you classes or begging you to subscribe to their YouTube channel and they certainly won’t tell you it’s an easy task that everyone can do. Experienced pros will tell you almost the opposite. They’ll explain how difficult it is, the years they’ve had to spend honing their craft, and how they still get it wrong to this day. Why? Because they don’t make their money by click baiting or selling subscriptions, they make it by being successful investment advisors and developing deep, meaningful relationships with their clients. 

But wait, there's more! Enter the prophets of doom, the self-proclaimed financial clairvoyants. They've been singing the "end is near" anthem since forever. Remember the 2008 crash prophets? Yeah, those folks who turned a single right prediction into a lifelong career. But let’s be real, their crystal balls haven't been all that accurate since. 

Here’s a tweet from the famous hedge fund manager, Michael Burry, who was depicted by Christian Bale in the movie The Big Short, cryptically tweeting “SELL.” to his 1.4m+ followers. It has been viewed over 6.7m times since it was posted1.  Unfortunately for Burry and anyone who blindly took his advice, the S&P 500 subsequently rallied another 17.01% to close out 20232 ... 

At least in Michael Burry’s case, he had the self-awareness to admit he was wrong a couple months later, and even congratulated investors for buying the dip. But let’s look at another prognosticator that doesn’t do as much self-reflecting: 

Robert Kiyosaki, author of one of the most-read finance books of all time – Rich Dad, Poor Dad. He wrote the fantastic book in 1997, and we’d recommend anyone interested in learning the basics of personal finance give it a read. But what’s he been up to since? Sadly, he's turned into just another prophet who’s predicted 8 of the last 2 bear markets. 

Why would someone like Robert Kiyosaki do this? Because fear sells! And here’s the kicker: some folks make a killing not by doing the thing but by selling the dream of doing it. It’s like a snake eating its tail—selling the illusion of success rather than actual success.  

The examples go on and on. Infamous TV host, Jim Cramer, is known for recommending stocks which then proceed to immediately plummet. He now has an ETF that inverses his stock picks. Or radio personality, Dave Ramsey, who recently claimed a retiree can sustain an 8% withdrawal rate in retirement. This was subsequently debunked over and over again as it was so blatantly wrong, us finance nerds could not let it stand (example:

And guess what? We’re not immune to financial missteps either. Ask any financial advisor, and they have a stock or investment that they regret buying at some point in their career.  

So, amid this financial circus, remember, real advice doesn’t scare you into action; it enlightens. It’s not about selling dreams; it’s about shedding light on the pros and cons.  

In a world of smoke and mirrors, let’s keep our financial wits about us. After all, we’re here to do the thing, not just sell it. Cheers to savvy investing and staying one step ahead of the "gurus”! 






2 Koyfin