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Money and Investing on TikTok: Five Hacks to Avoid and Why, According to Experts

by jcp
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  • New research by financial brokerage XTB reveals which #FinTock and #StockTock trends should be avoided, and why
  • Some TikTok hacks with over 500,000 views are promoting extremely risky investment strategies that could leave investors broke
  • With hashtags such as #investing, #money and #stocks gathering over 43 million views on the platform1, misleading hacks such as these are gaining more attention than ever

TikTok is one the biggest social media platforms in the world, and people are using it for more than just casual entertainment. Thousands of people are looking for financial advice on the platform, from content creators who post tips and tricks for making money called “Investing and Money Hacks”. Whilst learning about investing and how to manage finances should be encouraged, some of these TikTok hacks are very misleading and could be dangerous for a lot of people.

To help debunk these misleading hacks, analysts at financial brokerage XTB identify five “Investing and Money Hacks” that have gone viral for all the wrong reasons2 and explain why they should be avoided:

1. Make 100% Return Hack – 597K views

This hack is great – in a perfect world. This hack tells you to invest $1,000 into a risky stock and when you have $2,000, invest the initial $1,000 into a low risk dividend stock, and continue to repeat this until you are rich.

The first glaring problem: make a 100% profit from a risky stock. If trading was that easy, we’d all be millionaires. The average price return on the FTSE 100 has been 5.7% since 1983. Therefore, to double your money on a single stock – whilst possible – is more likely a fantasy for the majority. Keep in mind that risky stocks are risky for a reason – you could lose everything just as easily as you could make money!

2.  Becoming a Millionaire Hack – 2.9M views

This “hack” or “advice” simply says that once you save up $2,000 from a “side hustle” or even a regular job, you can then turn it into $100,000 from “Cigar Butt” methods, CMARs and not diversifying your investments. Who knew it was that easy to generate a profit of 5,000%?

The hack then goes on to explain that you should make Low Risk / High Reward investments until you reach $1m.

This advice would only work if you had the Midas touch of stock trading, and every stock you invested in turned to gold. Turning $2,000 dollars into $1 million takes huge amounts of knowledge and effort, not to mention a lot of time and some luck along the way. This TikTok is extremely misleading and shouldn’t be taken seriously.

3. Passive Income Hack – 3M views

This TikTok hack explains that you should use passive income in order to pay for something you may want to buy – in this case a new truck. According to this hack, you should purchase a house with a $25,000 down payment which when rented out will cover the costs of monthly payments of the truck.

That’s all well and good if you have $25,000 lying around to put down on a house!

4. Cheap Cryptocurrencies that are ready to explode – 100K views

These hacks highlight three or so cryptocurrencies that they claim are going to “explode” (see a sharp increase in value). Depending on the TikTok and which cryptocurrencies they choose, they could be completely right or completely wrong – most of the time, the creators of these TikToks have no idea!

If you’re looking to invest in cryptocurrencies, do not blindly follow recommendations that you see online without doing your own research first because, as we saw with what happened to Luna, cryptocurrencies can go from their most promising to being worth absolutely nothing in a very short period of time.

5. Money hack for Financial Freedom – 666K views

This money hack claims that instead of purchasing a common monthly subscription service like Netflix for $10 with your own money each month, you should instead invest $2,500 and use the $10 return in interest to pay for it – and continue to do this with every purchase you wish to make.

Two problems with this one:

  1. You probably don’t have $2,500 lying around to invest, but you probably do have an extra $10 of disposable income every month in order to pay for something like Netflix.
  2. Not everything you invest in is going to return a profit. It’s always important to keep in mind that, while investing as a whole can be a great way to improve your financial position over time, not every investment you make is going to return a profit. For example, you can invest those $2,500 into a company, but then their share price goes down, so not only would you not get your $10 a month in interest, but your initial $2,500 would be worth less.

These are just a select few of the finance hacks currently trending on TikTok. It’s always important that any financial advice on social media is taken with a pinch of salt – if in doubt, or if it sounds too good to be true, it probably is!

Top 3 tips from the experts at XTB

  1. There is no get rich quick strategy. Don’t be fooled into thinking there is. Investing is a skill that must be honed over years of experience.
  2. Have a trading plan. This is a key step when you first start to invest. In this plan you should consider the risk/reward ratio, risk management, technical analysis, fundamental analysis, and economic data, etc.
  3. Pick the strategy which best suits your personality, time and knowledge. There are hundreds of strategies out there. Yet if two investors choose the same strategy, in my experience they will each get different results. This is due to the fact we are all different people and handle situations differently. For example, if you over react to price volatility, day trading may not be a good idea. So try and pick the strategy which fits your style first, and then look for which markets that strategy can work successfully.
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