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- #36: How Social Media Has Ruined Investing
#36: How Social Media Has Ruined Investing
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Welcome to the 36th post of the Spark to FIRE Newsletter.
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How Social Media Has Ruined Investing
As per an Instagram follower’s request, I wanted to share my thoughts on the impact of social media on investing - mostly the bad parts. While social media platforms like Instagram and TikTok have undoubtedly revolutionized the way we connect, share information, and learn, there are negative impacts that affect both new and experienced investors.
In this post, I’m going to list the worst parts I see in today’s social media and let me know if you agree.
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The Dark Sides Of Social Media
📈 The Rise Of Finfluencers
Finfluencers, or financial influencers, have dominated the social media space. They’ve become a trusted voice to their audience.
The fame of finfluencers really grew during COVID because people had money to save, the stock market was doing well, and everyone wanted in on the action. Also, the virality of TikTok fueled this momentum.
Here are some types of finfluencers that I recommend avoiding:
Commercialized Finfluencers
Fake Finfluencers
Wannabe Finfluencers
Commercialized Finfluencers
While finfluencers mostly share helpful tips and insights, some are driven by their own self-interests. I’ve seen micro finfluencers who shared valuable information, but once they became ‘Instagram-famous' and full-time finfluencers, they would later just regurgitate the same information as every other fininfluencer.
One example is Section 179 of the IRS tax code that allows businesses to deduct the full purchase price of a vehicle. I only know the exact section number (179) because I HEARD IT SO MANY TIMES from multiple accounts.
When one account shares something, another account will share the same information to their audience, and then another will do the same and so on. It’s the typical social media cycle.
Their job is creating content because as a business, it doesn’t make sense to buy a Range Rover just to reduce your tax liability in the vast majority of cases because you “save” the (purchase price)*(effective tax rate) but you end up spending more than you actually would’ve paid in taxes.
This is why I stopped going on TikTok because it’s the worst there. The finfluencers become the business and are just content recycling machines for views to make money.
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❌ Fake Finfluencers
The worst finfluencers are the fake ones. They’re the ones who say they’re millionaires, flash expensive things, go on podcasts to say stupid things, and say they have multiple 7-figure businesses.
Yet, they won’t tell you exactly what their businesses do. They’ll just say they own real estate or is a serial entrepreneur. Remember the guy below? FINED $53 MILLION!
I don’t think I need to explain this type too much.
A recent trend I’ve been seeing are content creators who sell this dream of earning money online. They often screenshot/photoshop images of their sales revenue and then try to get you to click their link to learn how you can do the same. This will lead to a free lead magnet and then a membership to join their community and buy their course to learn how you can be like them.
This is the elevated version of a course seller selling a course to another person to become a course seller. I admit that the marketing pull is very attention-grabbing so I can see how people fall for it. Who doesn’t want to make money online?
The 🚩 red flags are:
that they tell you that you’re an expert at SOMETHING so you can make a course for it, yet their course is to teach others how to make courses and sell
screenshots of their sales revenue
option to join their community (that charges a subscription)
A lot of these tactics are used in get-rich-quick schemes because that’s what hooks people into the funnel.
If you advertised that it takes years to get where you are, your conversion rate will dramatically decrease.
🤣 Wannabe Finfluencers
These finfluencers share a story of how they turned their life around after a traumatic money experience or they try to come off as an expert.
They deceive their audience into thinking that they’re living a different life like they “generated $16,000 for the month of October from rental properties”, but they actually only net $2,600 after mortgage obligations and brag about their paid off Corolla being their dream car.
Even worse is when they act like a finance expert, but they don’t know their company’s 401(k) vesting schedule and complain when the company takes it back or that CPAs are not given out by colleges.
FOMO & Hype Culture
While social media has allowed me to meet some great people online, it comes with drawbacks. It’s cool to see how others are living life, but there are obviously bad actors who try to portray their life as something else. A Lamborghini (rented) and a penthouse (rented) is enough to convince some people to get into foreign exchange trading or dropshipping.
Another one is the $GME and $DOGE fiasco. While some people won big, a lot of people lost. They saw the hype and decided to buy in when they never would’ve if it weren’t for social media. Then they became the suckers holding the bag with massive losses.
Platform For Uneducated Misinformation
Somehow, speaking into a mic on a podcast has become a sign of authority and legitimacy, but to me, it’s more like “trust me bro, I’m on a podcast”.
Anyone can start a podcast and being on any has given people this false sense of reality that they’re important or their opinion is the bible.
Social media has allowed anyone to have a platform. While this is a good thing for the most part, it’s also a source of misinformation.
Just because someone on a real estate podcast says that the real estate market will have modest appreciation through 2023 doesn’t mean you should trust them, even if they’re in charge of data at a really big real estate media company without any real experience working with data and just reads reports published by RedFin and Zillow.
Final Words
With the rise of finfluencers and today’s social media culture, it’s important to be careful who you trust. If it seems too good to be true, it likely is.
Always do your due diligence and think things through before acting on it.
Speak to multiple people who have experience on a subject rather than believing someone with a mic and a platform.
Stay financially safe ✌️
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