You can find short-video content for just about anything on TikTok. In fact, this app has become a popular place for individuals to learn about personal finance and investing.
However, not all financial or money management advice on TikTok can be considered helpful or good.
The issue is that more nuanced information starts to become risky. And for beginners, it can be difficult to separate topics appropriate to them from the ones they are not ready to tackle just yet.
So when looking for relevant, good financial advice on TikTok, here are three things you need to remember:
Context is Important
Context matters, and the same can be said for helping people understand the differences between financial products.
Many personal finance content on TikTok can be self-centered advice that lacks the context that many financial experts use to help their clients grasp strategies and products and how those can aid their situation and affect them in the long run.
So before you take someone’s 60-second TikTok video on the best investment or retirement plan, check their background first. See whether that person has another website that would provide more information about them or the proper credentials to support their story.
If they posted the advice because it worked for them, instead of treating it as something that would also work for you and everyone else, treat it as a basis for your own research on the topic.
The Creator’s Experience Matters
It can be challenging to identify which creators on TikTok are real financial professionals and which ones are amateurs. Furthermore, it turns out that several of the popular personal finance influencers on the short-video platform lack the proper credentials.
While there is no condition to be officially authorized to provide personal financial advice, individuals are typically required by financial regulators and governing bodies to complete certification courses and have them renewed regularly.
The certificate would prove that their financial expertise is reliable and up to standards.
Getting financial advice from people who don’t have any real credentials is risky. Still, it does suggest that you should consider it carefully and check whether the information is accurate before making any decisions.
Watch Out for Day Traders
There are many day traders on TikTok, and you should try to avoid them as much as possible.
Day traders who provide stock picks out on the short-video platform don’t always know whether their advice would benefit the viewers absorbing the information. Note that giving someone an idea and urging him to take action is entirely different from just talking about an idea.
A well-thought-out investing strategy should suit an investor’s risk tolerance. However, a content creator on TikTok would not really know the risk tolerance of every single one of his viewers.
With one billion monthly active users worldwide, the odds of personalizing investing content for each TikTok user are pretty low.
Moreover, users of the app should consider the type of stocks being endorsed. For example, if it’s a penny stock that doesn’t have a lot of trading volume, that may be a red flag for a pump and dump scheme.