Financial influencers are usually wrong
🔸 Plus: The minimum wage is going up 🔸 FTX founder Sam Bankman-Fried will be sentenced today 🔸 Rich people are embarrassed to buy Bentleys 🔸
Hello! Here’s today’s 2-minute guide to demystifying money and making you richer
Statistical proof you should ignore financial influencers.
The UK minimum wage will rise to £11.44 an hour next week. Yay!
FTX founder Sam Bankman-Fried will be sentenced today.
Reddit stock took a hit after an attack by short-sellers.
Libor manipulator Tom Hayes lost his appeal.
Rich people are too embarrassed to buy Bentleys.
Blackrock’s Larry Fink says there is a global “retirement crisis”.
The markets, year to date
S&P 500: 5,248.49 ⬆️ 10.66%
FTSE 100: 7,931.98 ⬆️ 3.09%
Bitcoin: $70,622.20 ⬆️ 59.88%
GBP to USD: $1.2603 ⬇️ 0.98%
GBP to EUR: €1.1690 ⬆️ 1.37%
Statistical proof that financial influencers should be ignored
Fifty-eight percent of young people in the UK follow TikTok finance influencers, or “finfluencers”, according to a poll by Mortar Research.
Unfortunately for them, the data shows that this is a good way to lose money:
74% of people who followed financial guidance from a social media source lost money, according to a recent survey by Capital One.
There’s a reason for that: Influencers turn out to be a terrible source of investment advice, according to an academic study.
Researchers at the University of California, Berkeley, Louisiana State University, and the Swiss Finance Institute wanted to find out what would happen if people actually followed the investing advice doled out online by influencers. They looked at 30,000 users who made stock recommendations on StockTwits, a social media platform linked to Twitter favoured by amateur stock traders.
The results were very bad for online stock gurus
On average, investors would have underperformed the market by 0.35% per month (4.1% annually) if they followed the advice of the influencers.
Only 25% managed to outperform the market, by 1.9% per month (25% annuall).
But the bottom 25% underperformed by 29% annually, skewing the average result downward.
There was a correlation between being popular and being wrong
The worse their recommendations are, the more followers the finfluencers tend to have, the data showed.
That means if you randomly follow an influencer, you are likely to be following one who will lose you money.
This is a serious problem for the 79% of Gen Z and Millennials who say they follow financial influencers (in the US) and the one-third of people aged 45 to 54 who do so in the UK.
We’ll give the last word to equities analyst Joachim Klement, who brought our attention to the StockTwits survey:
“I got some stick [previously] for calling them talent-free people with fewer brain cells than the money I have in my bank account. Maybe that was a bit harsh. So, let me revise my opinion based on [this new study]: They are a waste of time and money.”
So, what should you be doing?
The Moneyin2 plan
There are no get-rich-quick schemes. If you want to be financially secure and build wealth you have to be smart and diligent:
Start saving now, even if you’re broke. Here is how to do it.
Join your workplace pension scheme. (It’s free money!) Aim to save 15% of your pay, if you can.
Open a Self-Invested Pension Plan (SIPP) if your employer doesn’t have a pension plan — the government will match any money you put into it by at least 20%.
Use a Stocks & Shares ISA or a Cash ISA to ensure your savings and investment gains are tax-free.
Make sure your pension/SIPP/ISA savings go into stocks. Use an S&P 500 ETF or a Nasdaq tracker, or something similar.
Let the miracle of compounding work for you. Here’s how.
Automate your savings with a direct debit or a round-up account, so you don’t have to think about it.
SNAG: Save. Now. Automatically. Get that tax-free money!
And, of course, continue reading Moneyin2!
And for dessert …
FTX founder Sam Bankman-Fried will be sentenced today. US prosecutors are asking for a prison sentence of up to 50 years for his role in the collapse of what was, at the time, the world’s biggest crypto exchange.
The UK minimum wage will rise to £11.44 an hour next week, an increase of about 10%. Employers are already complaining about it — which means it’s probably good for you.
Reddit stock took a hit. Short-sellers think that shares of the “front page of the internet” are overpriced.
Libor manipulator Tom Hayes lost his appeal. The former UBS and Citigroup trader was convicted in 2015 of manually altering interest rates for interbank loans, making interest rates more expensive for the countless financial services based on them. It was one of the most important cases to emerge from the 2009 financial crisis. Hayes had argued that he was simply doing what his bank bosses had asked him to, and that no other country found that this was a crime.
Rich people are too embarrassed to buy Bentleys. “Even though our customers can still afford our cars, there was a level of emotional sensitivity that slowed down demand,” CEO Adrian Hallmark told CNN.
Blackrock chairman Larry Fink says there is a global “retirement crisis” as the world reaches a tipping point where there are too few younger people of working age paying taxes to support our aging population. He suggests that many countries’ retirement systems simply won’t have enough money to pay the pension benefits needed. Governments may be forced to raise the pension age by several years. This is why Moneyin2 exists: We’re going to help you avoid getting sucked into this nightmare. We’ll return to this topic in future editions of Moneyin2.
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Photos: Party Down via Giphy; Janine Coombes via Giphy; Cointelegraph via Wikimedia.