You’re probably used to reading articles that give you tips and financial guidance, but here’s a new take on it all: financial advice to avoid. Well-meaning friends and relatives often give unsolicited input on how you should spend or invest your money, and it’s not always something you should follow. Here are some instances where you should walk, or maybe even run, away!
Hot Stock Tips
While someone may believe they have a hot tip to share, no one knows for sure whether a stock is going to go up in the short term. Even if the tipster has invested in it, do your own due diligence, and realize you’re probably not going to make money buying and selling stocks quickly. Stocks are more for the long view and your own personal investment plan.
Speculative ventures are just what they sound like: risky, unsubstantiated deals. Even if you see a business plan, there’s absolutely no assurance that the venture will succeed. Some startups or spec projects will prosper, but if you choose to get involved, make sure you go into it with your eyes open. If you’re going to invest in a spec project, it’s best to do it with money you can afford to lose - one of many investing mistakes to avoid.
If It’s Too Good to be True
Just like your grandpa told you, “if it sounds too good to be true, it is.” The secret to building wealth is time and compounding interest. There aren’t any shortcuts. Anyone promising wildly successful interest or return on investment is at a minimum, stretching the truth.
Borrowing to Invest
Never borrow to invest money. If the worst happens and you lose it, you’ll have to find a way to pay it back. It’s just not worth it. Use the money you have, even if it’s just a small amount, and invest it wisely with the goal of creating recurring income streams. The same goes with anyone trying to influence you to go into debt. Lots of people get swayed by a low monthly payment and don’t think about all the additional money they’re spending in interest.
Using an Unqualified Financial Advisor
Only work with a reputable financial advisor who acts as your fiduciary, meaning he or she is legally and ethically obligated to place your interest first. Your advisor should have a clear picture of your financial situation before offering any advice about saving and investments. Many sales reps for whole life insurance and investments position themselves as financial advisors, but they don’t carry fiduciary responsibility.
Consider the Source
Who is giving you this advice? Is it totally biased? Sometimes a huge return on investment, whether it’s a stock or in real estate, is based on good fortune. People often give themselves credit and think they can do it again. Or, even worse, some people who offer financial advice aren’t even financially successful themselves. You definitely don’t want to listen to them!