This is the worst money advice on the internet

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Read on: How to tap into the swamp of internet financial advice

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You are sure to come across a variety of financial advice. Many qualified professionals share solid advice on their popular channels, like Tiffany “The Budgetnista” Aliche and Soledad Fernández Paulino of Wealth Para Todos. But there are also plenty of “hints” you should ignore, ignore, ignore — or at least question.

I recently spoke with Anne Lester about identifying bad internet financial advice. Lester is the former head of retirement solutions at JPMorgan, where she worked for nearly 30 years and was the founder of the Aspen Retirement Savings Leadership Forum; she left JPMorgan to focus on helping Gen Z and Millennials save for retirement More money and make good investments. Given that nearly 40% of Gen Z say they learn about money from social media, Leicester is working overtime to ensure young people are starting their retirement journey on the right track.

“I think there’s some very sound advice out there,” Lester said. “But I also think that when I put on the JPMorgan hat, the hair on the back of my neck stands up because it’s horrible.”

There are two red flags to look out for when you’re browsing financial advice online, she said.

Number one: anyone telling you to buy or sell anything in big, bold, all caps

You shouldn’t buy or sell something just because an influencer says you should. period.

“Especially things like cryptocurrencies and individual stocks,” Lester said. “There are people who are true believers and they knock on the table outside, but a lot of people — it’s a classic thing, talk about something you have a stake in and then quietly sell it behind the buyer’s back. It’s been the case all the time. Until there are financial markets.”

As an investor, she says, you should be able to explain in simple terms why you’re getting a return on something. For example, Company X makes a product that people want to buy. Over time, if the company is doing well, it is reflected in the value of the company.

When it comes to cryptocurrencies, however, “I don’t see anyone giving a sound argument for why it should continue to appreciate,” she said.

Second: the absolute principle that “everyone” should follow

When you see blanket advice – like “everyone should buy a house” – Lester says to question it. It might make sense for you, but no single financial decision—like buying a home—will be for everyone.

Lester explained that for all financial advice, there’s a title that’s almost always true — for example, You should save money — but beyond that, it all depends on your situation. Yes, you should save, but how much you save, where you put it, and what you save all depends on your specific situation and goals.

“You should invest your long-term savings, like retirement, in a combination of stocks and bonds. That’s good advice. But beyond that, it all depends,” she said. For example, “One of the things I’ve seen recently is, ‘You have to buy a house,’ or, ‘You should never buy a house.’ Those are bad advice because the real answer is: it depends.”

Ultimately, Lester’s advice is twofold: First, take the time to question the money advice you’re spending and consider its source. Most people who share this type of information make money in some way, either by clicking (which explains the big! Bold! headlines, as they are designed to use our emotions and anxieties to get us to click) or by selling them.

“Young people are very distrustful of the ‘system’ because they think it’s being sold all the time. I think there’s a certain level of skepticism about that,” she said, “but I would point out that most online users have a relationship with them. There is an associated revenue model for the internet.”

Making money online is not inherently bad. But influencers should be transparent about their revenue models so you can consider their recommendations in context.

Her second piece of advice: If it looks too good to be true, it is. “You can always look back at a stock” that exploded, making early investors rich, like Apple or Tesla, Lester said. This will always be true. “But the reality is that it’s not a sustainable or reliable way to make money.” For every “easy” way to make money, “it works until it stops working.”

–Stephanie Hallett, Senior Editor, Personal Finance Insider

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