Sorry, Fam, but 90% of Viral TikTok Money Advice Could Hurt You
Scroll on TikTok for a few minutes and you’ll likely come across at least one piece of money advice. While this isn’t implicitly bad, Richard Coffin, a portfolio manager and chartered financial analyst charterholder, recently reviewed viral TikTok videos and found that 90% of TikTok money advice could hurt you. Here’s why and what to do.
Viral Advice Oversimplifies Risk and Reward
One of the most viral pieces of money advice on TikTok is prediction markets, where you place bets on high-probability events. If you predict the event correctly, you make money. This sounds like easy money, especially if you have insider information.
However, Coffin likens this to day trading, where some people may make money while the majority lose. He continues to warn about prediction markets because it’s like gambling.
“You're rolling the dice and the odds might be good on any single roll, but you're hoping the whole time that the odd contract doesn't just completely wipe you out,” he said.
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Headlines Don’t Create Investment Strategies
Another popular piece of TikTok advice is tying trending news to a must-buy stock. For example, a war breaks out? Buy defense stocks. Is AI booming? Buy tech stocks. Oil prices rise? Go all in. While some of this is true, it depends on your time horizon.
“This isn’t a good long-term strategy since you’re buying a stock off a near-term event,” Coffin said.
Plus, according to Coffin, markets move fast. So if you’re trading or investing off the news, by the time a trend hits your feed, it’s usually already priced in.
He suggests that you should never invest long-term based on near-term headlines. You have to understand the business and know the company’s financial health.
Copy Trading Is Not a Cheat Code
Some TikTok creators are advising people not to get a job but instead to copy other profitable traders on Polymarket. There’s a catch though; you need to sign up for an account using their referral codes. This means they’ll earn a cut from your trading fees.
Additionally, copy trading almost always fails because even seasoned investors struggle to consistently beat the market.
Coffin said that if hundreds of people copy the same trader, later buyers drive up prices and when the original trader exits, everyone scrambles to sell at a loss. He recommended exchange-traded funds (ETFs) instead.
Unrealistic Return Expectations Set You Up To Take More Risk
This is one of the most harmful trends on TikTok. One creator says you could turn your $2,000 tax return into $100,000 in six months by investing in tech and AI stocks. Such a claim sounds unrealistic. And for new investors who may not quickly spot such red flags, they may end up taking more risk to make more.
Coffin said that's how people end up losing more money. Even a 20% annual return in the stock market is exceptional. Anything far beyond that, especially within a short period of time, should raise red flags.
Not All TikTok Advice Is Wrong, but Context Matters
Some TikTok money advice contains some truth. But before you act on any advice you get online, Coffin recommended using this checklist from CFA Institute to evaluate any tips:
Motivation: Does this person have a financial stake in your decision? Are they pushing referral codes, course links or affiliate platforms? All these are conflicts of interest worth noting.
Consistency: Does the advice hold up against other credible sources, such as financial publications, regulatory agencies or licensed professionals? Do your due diligence.
Qualifications: What actual credentials does this person have? A lifestyle that looks successful isn't the same as expertise.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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