TikTok’s 9 most popular pieces of investing advice, rated and reviewed by 2 financial experts

TikTok Markets
  • The TikTok hashtag “#investing” has amassed over 2.8 billion views on the mobile video app as young people flock to the platform to learn about the stock market.
  • While there’s plenty of helpful information, there’s also a lot of bad advice.
  • Insider asked two financial experts to watch and review nine popular TikTok investing videos with questionable advice. Here’s what they had to say.
  • Sign up here our daily newsletter, 10 Things Before the Opening Bell.

The investing side of TikTok, better known as “StockTok”, is ballooning, with the TikTok hashtag “#investing” garnering over 2.8 billion views. Many videos with tagged with #investing are centered around investing tips, and novice traders on the app have said they often heed the advice.

Thirty-six-year-old Douglas Boneparth, who provides investing advice to Millennials through his firm Bone Fide Wealth, said he loves the greater attention given to the world of investing through social media. But with the democratization of the stock market comes a lot of misinformation and “cringe.”

“It can get loud and noisy, and if you follow the wrong thing you can make some mistakes you really regret,” he said.

Insider asked three market experts for their take on nine popular TikTok investing videos with questionable advice.

Boneparth, along with Sam Stovall, chief investment strategist at CFRA, spoke with Insider for the story. Five of the TikTokers did not respond to Insider’s request for comment, and two couldn’t be reached through social media.

Video: “Max out your 401K could be the dumbest advice

TikTok bad investing advice
A screenshot of Kris Kohn’s TikTok video about 401Ks.

Kris Krohn, @kriskrohn, advised his 832,000 followers to avoid the “401K scam” in an August 2020 video. Krohn, known for his real estate-investing advice, said “max out your 401K could be the dumbest advice that I’ve ever heard for anyone that wants to take control of their financial future.”

“I admire his passion and love for real estate, but this is just factually incorrect,” Boneparth said. “A 401k is not a scam, it offers tax advantages.”

Sam Stoval said the advice is good “only if you like to throw away money, and if you are a believer in illogical conclusions.”

“Maxing your company’s 401K match will get you free money, since the company will give you – free of charge – all or some of your contributions,” Stovall said.

Plus he said stocks, which 401Ks can invest in, have delivered an 11% compound annual total return since 1946, not the 1% Krohn claimed in the video. The retirement accounts can ensure “the building of a substantial retirement nest egg,” he said.

Video: “How to make a million dollars or more with very little effort

TikTok Investing advice
Screenshot of TikTok video on how to make a million dollars

The @teen.executive account, which has 187,500 followers, said people can make a million dollars or more if they use soap and shampoo samples from hotels, saving about $45 per month, and investing those savings into the S&P 500.

Stovall said that practically saving money whenever possible and investing those savings “is indeed useful advice toward becoming a millionaire by the time you retire.”

But, “who’s spending $45 a month on soap?” Boneparth said, “and you still have to pay for the hotel room.”

Boneparth, who wondered if the video was made as a joke, said penny pinching on the small things isn’t the path to financial independence.

“Soap alone isn’t going to get you a million dollars here.”

Video: “I see a stock going up, and I buy it

TikTok bad advice
A screenshot from the @chadandjenny TikTok investing video

The couple from the @chadandjenny account told their 116,000 followers that they make money by buying stocks that go up and then selling at the top.

The video’s advice reminded Stovall of a humorous quote from the Great Depression to buy stocks “that go up, and if they don’t go up, don’t buy them.”

Boneparth said the couple is actually describing momentum trading, in which investors have to time the market, which is “very difficult.”

“You can be very wrong trying to do momentum trading and guess when the stock is going to go up or down,” he said.

From a constructive perspective, the video “encourages novice investors to learn about technical analysis, focusing on: turnaround spotting, trend following, and topping patterns,” Stovall said.

In a response to Insider on TikTok, the user said, “The strategy I use specifically is referred to as scalping.” He said it’s “similar to momentum trading but much more short term.”

Video: AMC could reach $100,000 per share or more

TikTok bad investing advice
A screenshot from the @atomcash TikTok video about AMC shares.

Amid the resurgence in meme-stock mania around AMC Entertainment, the @atomcash account, which has 1,400 followers, said, “Mathematically speaking, it is statistically possible that AMC can reach anywhere from 100k a share to 500 or even a million dollars a share.”

“There is a huge difference between being ‘statistically possible’ and ‘realistic,'” Stovall said.

At even just $1,000 per share, the company, which is currently trading at all-time highs around $45, would be a $500 billion business.

“It’s just absolutely ludicrous to think that AMC, a company that’s bleeding cash and trying to shore up its balance sheet and survive would be worth something slightly less than Tesla,” Boneparth said.

Video: “Buy what rich investors buy”

Tik Tok investing screenshot
A screenshot from the @ceowatchlist TikTok account.

The creator behind @ceowatchlist publishes regular TikToks encouraging his 822,000 followers to track public investing records of CEO’s, senators, and other rich people and buy what they buy.

It’s a piece of advice that a lot of investors follow, seeing how many attend the Berkshire Hathaway annual meeting and read Warren Buffett’s letter to investors, Stovall said.

“A problem with buying what rich people own, however, is that these rich people probably don’t publish a newsletter telling when to buy and sell, along with publishing a track record,” Stovall added. “Therefore, blindly buying what rich people own means you may get in late and never know when to get out.”

Video: “Support and resistance lines will show you when to buy and sell”

technical analysis
A screenshot from @Chris.stocks TikTok video

Tik Tok Creator @Chris.stocks detailed to his followers what a support and resistance level is, and said when you see a stock nearing it’s support or resistance level, you can predict what’s going to happen, and make money.

“That is much of the basis behind technical analysts. ‘The trend is your friend until it ends,'” said Stovall.

Boneparth said the video is a foray into how to use technical analysis for trading, but warned that the skill takes time to practice.

“There’s no secret formula to getting rich,” said Boneparth. “I’m glad people are getting interested but that’s not long-term investing. You just can’t watch this video and go buying and selling.

Video: “Your money loses value in a retirement account”

tiktok screenshot
A screenshot from the @realitycheck2020 TikTok.

In another TikTok video slamming retirement accounts, @realitycheck2020 says that investors shouldn’t use retirement funds, as those charge fees while your money loses value. His solution is for investors to put money in an S&P 500 index fund, and then look for opportunities in new IPOs, cryptocurrencies, and real estate.

Stovall clarified that most retirement accounts allow you to invest in the S&P 500 at a low cost.

Boneparth summed up this video has “really broad financial advice from someone spouting their opinions about asset classes.”

“It’s not backed with any information that would help someone. It’s all predicated on FOMO, of a market that’s been treating investors well for taking risk,” he said.

Video: “SPACs only go up”

tiktok
A screenshot from the @tdorriz TikTok video.

@tdorriz tells Tik Tok that investors can turn their $1,400 “stimmy” (stimulus) into $10,000 by buying SPACs that are about to acquire a target company.

“If these target companies are any good, these stocks will easily double or triple overnight,” @tdorriz said in a TikTok

Boneparth said this investor is incorrectly linking correlation and causation, and urged investors to do their own due diligence.

“To just go buy any SPAC and not understand is a disservice,” said Boneparth.

“This advice assumes that all SPACs make money. There are no investment guarantees!” Stovall added.

In a response to Insider on Twitter, the TikToker said the idea “flopped,” but noted his video was just his opinion not advice. “80% of the stocks I buy go up in my opinion,” he said in a message.

Video: “Invest with cryptocurrency using a loan”

tiktok screenshot horrible investing advice
A screenshot from the @rickrahim TikTok

A TikTok from @rickrahim tells investors to take out a low interest loan, “plow it all into crypto,” and take out a tiny bit of profits each month to make monthly interest payments. Boneparth and Stovall both had strong reactions to this one.

“If he’s trolling, very funny. If he’s not, that’s an extremely dangerous, borderline stupid idea,” Boneparth said. ” Do not lever yourself to invest in any speculative assets. The risk is not worth the reward. Very dangerous, terrible, terrible financial advice.”

“Anyone who believes that a particular asset class ‘always goes up’ deserves to lose money,” Stovall said. “Also, why compound a possible mistake by taking out a loan (which carries its own cost) to purchase the investment you didn’t bother to research, or, worse yet, buying on margin? You’ll only end up losing more than you initially invested.”

Read more: A TikTok crypto influencer with nearly 600,000 followers explains why bitcoin is at risk of tumbling 30% in the next couple of weeks – and unpacks the tools he uses to determine price predictions

Read the original article on Business Insider

Reddit traders have scared away many short sellers following massive squeezes in meme stocks, new data suggests

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  • Short sellers have shrunk their positions in heavily shorted stocks by 80% since January.
  • Short-seller losses in that period were largely limited to meme stocks over the same period, Barclays said.
  • Traders wagering on meme stocks to fail have been “burned very badly” amid the frenzy, said strategist Matt Maley.
  • See more stories on Insider’s business page.

The army of retail traders credited with squeezing GameStop and AMC short sellers earlier this year have largely pushed bears away from meme-stock names.

The tally of stocks with high short interest – a measure of wagers to the downside – has “come down dramatically” from mid-January when the GameStop craze began, a report from Barclays shows.

The number of companies for which short interest makes up 30% or more of shares outstanding has plummeted from 43 to just 18. In dollar terms, that means short sellers have shrunk their positions by 80%, from about $25 billion to just $5 billion, the data show.

The meme-stock craze has “definitely had an impact,” Matt Maley, chief market strategist for Miller Tabak, told Markets Insider, as short sellers have been “burned very badly.”

“It really disrupts a lot of strategies,” he said. “Some of these long-short strategies that have worked very well for a long time are getting thrown through a major loop because there’s no way any model says GameStop should trade at $300 something or AMC should trade at $70.

He added: “It ruins their hedges, and they’ve got to rethink some things.”

Amid the GameStop craze alone, analysts estimated short-seller losses totaled $19 billion. Melvin Capital, which took a 53% loss because of the craze, later exited all of its public short positions, though it may still hold some privately.

Renewed interest in meme stocks in recent weeks has driven more short sellers losses. On June 2 alone, a meme stock rally led by AMC caused nearly $5 billion in losses for short sellers in the top 10 shorted stocks, ORTEX data showed.

Even so, “the recent short squeeze in meme stocks over the last two weeks has also not led to material underperformance of the short interest factor baskets during this period,” Barclays said.

Short-seller losses have been largely localized to meme stocks that have generally had high short-interest rates. The data shows total short bets has remained steady since January, but the number of heavily shorted stocks has declined to less than 1% from 2.8% of the total.

“Given the low risk of a broad contagion, we view the fallout of the recent short squeeze to be limited,” Barclays said.

Bearish bets on companies with high short interest rates have been underperforming since March 2020, and the GameStop episode accelerated that, said Barclays analysts led by Maneesh Deshpande.

“The underperformance in the January 2021 episode was more acute in smaller cap names, which is where most of the high short interest was concentrated,” they said.

Small to midsize companies are the easiest targets for retailers to drive a short squeeze, as it doesn’t take as much money to move the stock, according to Maley.

“Those are the ones you can really squeeze because they’re just less liquid,” he said. But a company like General electric with a big share float, “you can’t squeeze; there’s just too much money in the stock.”

Read more: The CEO of investment-research firm Fintel shares 20 heavily shorted stocks primed for a squeeze, based on an explorer he built to help retail investors identify opportunities

Read the original article on Business Insider

Meme stocks whipsaw as AMC share sale ends massive Reddit-fueled rally

Reddit
In this photo illustration a Reddit logo seen displayed on a smartphone.

  • Meme stocks largely retreated Thursday, with AMC, GameStop, and Bed Bath & Beyond all falling.
  • Some retail favorites, like Tilray, Clover Health, and Virgin Galactic continued to rally, though.
  • AMC dropped as much as 40% after announcing plans to sell nearly 12 million new shares.
  • See more stories on Insider’s business page.

A handful meme stocks held onto strong Thursday while others, including AMC Entertainment, GameStop, and Bed Bath & Beyond retreated.

BlackBerry led gains among meme stock Thursday before turning downward along with other well-known names. The stock, which fell as much as 8%, was the top conversation piece among retail-trader favorites on Wall Street Bets with AMC and GameStop behind it, according to data from Quiver Quantitative.

AMC, which nearly doubled in price yesterday, fell as much as 40% after the company announced a 12-million share sale. Trading halted three times for the stock amid the sharp decline.

Other meme stocks that have rallied this week fell with it. Bed Bath & Beyond dropped as much as 27% after its 63% one-day rally Wednesday. And the original meme stock, GameStop, retreated as much as 13%.

Beyond Meat, a new meme stock pushed by Mad Money’s Jim Cramer, also fell along with Koss Corp.

But not all of the retail-trader favorites declined.

Canadian cannabis companies Tilray and Sundial both rallied despite the meme-stock losses. Tilray, which recently completed its acquisition of Aphria, jumped as high as 16% Thursday, as Sundial rose 33%, putting both stocks on a two-day rally.

The two companies have benefited from positive sentiment from retail traders after Amazon announced it would back a federal bill to legalize marijuana. They were among the “most discussed” stocks on Wall Street Bets, Quiver Quantitative said.

Some other lesser-known meme stocks rallied alongside Tilray and Sundial, as well. Workhorse, the Ohio-based seller of electric vehicles and aircraft, jumped as much as 54%. Clover Health, the health insurer backed by Chamath Palihapitiya, jumped as much as 13% before paring gains, and space tourism company Virgin Galactic rose as much as 8%.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

Read the original article on Business Insider

Millennials’ love affair with crypto is burning red-hot right now – two out of three say it’s more attractive than ever. Here’s why they like it so much.

Close-up photo of a woman buying cryptocurrency through a smart phone app that is also showing the growth graph.
Close-up photo of a woman buying cryptocurrency through a smart phone app that is also showing the growth graph.

Cryptocurrencies are all the rage right now, thanks to the likes of Tesla boss Elon Musk hyping up dogecoin, or some of the world’s most respected financial institutions making bitcoin available to their clients, right down to youngsters on social media snapping up digital coins for pennies and then paying for college.

The value of most digital tokens has gone through the roof. Search volumes for “crypto” on Google outpace those for “stocks” by a ratio of 5 to 1 right now. Everyone wants in and to “HODL” – slang in the crypto community for “hold on for dear life”, or hang on to your bitcoin, no matter how crazy the price goes.

And at the very forefront of the charge into crypto are millennial investors. In the US alone, two out of three millennials say they believe it’s becoming a more attractive asset class. And why not? To many, it looks like quick, easy money and it’s the polar opposite of their parents’ definition of “finance.”

More time to secure returns, low-effort investing, the novelty value, detaching from traditional financial systems and the temptation of high rewards are some of the reasons some of the young investors we spoke to gave as to why they love cryptocurrencies.

The data certainly supports this.

Crypto exchange Gemini published a survey earlier this week showing almost 20 million Americans were planning to invest in crypto over the next year.

Mastercard’s New Payment Index showed earlier this month 40% of those surveyed said they would use crypto in the next 12 months. Specifically though, 67% of millennials said crypto had become a more attractive investment option since its boom began, and 75% of this age group said they wanted to learn more about the asset class.

Millennials are largely understood to be people born between 1980 and 1994, many of whom are gradually inheriting their baby-boomer parents’ wealth and pretty much all of whom have grown up in the digital age.

In the UK, more than half of all young investors are actively trading cryptocurrencies, and another 20% believe it is a solid investment choice, a Charles Schwab survey shared exclusively with Insider in April showed.

“After many half-drunk conversations with [a friend], we finally saw “the light” that was DeFi… The idea of being an early adopter, even with all the hype, was a little scary but also very exciting.” Jon Amar, CEO of public relations technology startup Vetted, told Insider in an interview.

But it was not just the novelty that attracted Amar into the crypto-sphere. “I can’t go to a store and buy a good or service with gold. I can, however, do that in certain places with crypto. This was a big determining factor for me, as it legitimized crypto as a viable alternative asset.” he said.

Melissa Lewis, a young investor who uses Binance to trade cryptocurrencies told Insider one of the reasons she likes crypto investing is its ease. “With crypto, you can buy it and forget about it for a couple days and then when I check it, it’s increased,” Lewis told Insider.

“Crypto has had a steady and stable increase, whereas my stocks are constantly going up and down,” she continued.

Others echoed this sentiment: “I also see a more visible path to making profits in this market versus the equity and bond market,” investor Mitchell Yousem said.

This long-term nature of crypto investments is one of the main reasons why millennials are the driving force behind the boom, rather than older investors, eToro crypto market analyst Simon Peters told Insider.

“With millennial investors compared to the older generation, time is on our side and we can afford to hold these investments for 20, 30, 40 years in certain cases and see what happens, where older generations don’t have the luxury of time,” he said.

But Peters also believes many are first tempted by the thrill that crypto’s volatility brings.

And these tokens are certainly volatile. The most widely traded, bitcoin, has risen by 78% so far this year alone, having hit record highs around $64,000 just one month ago. But this pales in comparison with the price action in some of the alternative tokens. Meme crypto dogecoin has gained 12,000% this year, while Cardano’s ADA token has risen almost 1,000%. But even that seems small fry compared with tiny, hyper-volatile tokens that can gain 1,000% in 24 hours.

“Whilst people may have gotten in initially purely because of the volatility and the price action, once they’ve actually gone and actually understood the technology, what it’s about, what crypto’s trying to do essentially that’s when more of an interest may develop as well, eToro’s Peters said.

It’s not just about convenience and money. Crypto, unlike traditional investment approaches, offers transparency Yousem said.

“I think many of the younger generation have a great deal of skepticism towards banking institutions, and investing in and choosing to use alternative forms of currency is one way to vocalize this view,” he said.

Based on Peter’s experiences at online broker eToro, he believes this plays a role on top of the money-making potential. “I think with the younger generation as well there’s perhaps over time been a bit of a disengagement with governments and central authorities and the whole, I suppose, ethos of crypto is to be decentralized.”

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