Is Finfluencers' Advice Good?

Happy Monday, wealthy people! 

Ever since I switched my career from Wall Street to Financial Education, I have met many wonderful people (non-investment professionals) who immediately tell me how they learned about investing from their favorite Financial Influencers (a.k.a. finfluencers).

Whether it’s the explaining-finance-through-celebrities Mrs. Dow Jones or the relatable Girls That Invest, it appears everyone has their favorite finfluencer.

Many within the financial services industry unsurprisingly dismiss them as amateurs. While most finfluencers are hobbyist investors who never invested professionally like I did, they do excel in two things that the finance industry is seriously lacking: relatability and entertainment.

Instead of dismissing finfluencers, I dug out studies that systematically analyzed if their advice was any good. Read on to find out their best and worst tips.

In today’s email:

👉 Stock Market Update 

👉 Is Finfluencer’s Advice Good?

👉 Ask Me Anything - What went wrong with my fund purchase?

👉 Sip of Learning - Rule of 72

Grab your latte and let’s get started!

Margarita T., CFA

Founder, Finance Latte

ARTIFICIAL INTELLIGENCE FUNDS EVENT - March 1

There are many mutual funds and ETFs in the market investing in companies involved in the Artificial Intelligence (AI) ecosystem, from LLMs to chips to tangential services and products in the industry.

👉 Join us for a fika in Stockholm to discuss the number of AI funds investing options and meet other like-minded women. Register here.

WEALTH BUILDING STRATEGIES

Is Finfluncers’ Advice Good? (Part 1.)

Finance Influencers (a.k.a. finfluencers) have been around even before social media gurus started inundating the internet with financial advice.

The first generation of finfluencers were the top authors of famous personal finance books, like Robert Kyosaki (Rich Dad Poor Dad sold 20 million copies since 1997) and David Ramsey (Total Money Makeover has sold 1.5 million since 2013).

James Choi studied the 50 top personal finance books by GoodReads and collected the most common advice by these non-economists (mostly men).

Is those first finfluencers’ advice any good?

The good:

  • Finfluencers prefer dividing money into different mental accounts for different goals, unlike economists who say wealth is fungible (i.e., it doesn’t matter where you hold the money). Our take: Dividing money does no harm (unless it results in more account fees), so I count this as good advice because it helps people manage their money more effectively.

The mixed:

  • Finfluencers prioritize paying debt either using the highest-interest debt (avalanche method) or the lowest-balance debt (snowball method.) They like both methods equally. Economists only advocate for the avalanche method. While I strongly agree with economists, I can understand the psychological benefit of the snowball method, which is paying down (and closing down) the lowest-balance debt first, which can feel empowering and help people keep on paying down other debt.

  • Most Finfluencers have a strong bias in favor of domestic stocks. If they are based in the US, they rarely recommend investing internationally. This is called home bias and even professional investors have it, but most finfluencers seem to completely ignore opportunities internationally. This is a missed opportunity to make money and diversify risk by easily accessible international funds.

  • Some finfluencers advise ONLY investing in stocks. ***clears throat** Let me put my professional-investor hat on for a second 🧢. I understand that stocks are easy to describe and more fun to discuss in podcasts and YouTube. However, a large portion of investors’ portfolio performance is determined by the ‘asset allocation’ decision, which is deciding which asset class to choose, whether that’s stocks, bonds, precious metals/ gold, real estate, etc. Ignoring all other asset classes and saying “Just buy stocks” is simply bad advice.

For a holistic approach to investing and wealth building using many types of investments and/ or fund products, learn from a professional investor like yours truly 🙂.

Our Investing Accelerator Program (A 10-week on-demand course with weekly live check-ins) starts later in March. Join our waiting list to get notified first and for an exclusive early-bird discount.

ASK ME ANYTHING

Question: “I tried to buy a mutual fund and clicked on ‘buy”’ early in the morning, but the order only went through the next day. What did I do wrong?

– Emily H.

Answer: “You did nothing wrong! Mutual funds can only be bought or sold once a day, at the end of each day. All investors, no matter what time of they day they place an order, get the exact same price that gets determined at the end of each day. That’s why you saw your ‘buy trade’ go through the next day. It takes a full day to be processed.

Compare that to other types of funds, like ETFs, which trade like stocks and you can buy or sell them any time during the day, even multiple times. That’s the main difference.

Keep on investing, Emily!”

– Margarita T., CFA

Got a question for me? Ask it by simply responding to this email.

BINGEWORTHY

🗞️ Article: 15 funds that have destroyed the most value over the last decade, per Morningstar. Cathie Wood’s ARK Invest tops the list.

🎬 Show: Fair Play. A Wall Street thriller where a young woman working at the same asset management firm as her boyfriend, gets promoted over him and her world crumbles...

📚 Book: Quite Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required. An inspiring read of self-made millionaire Kristy Chen, who retired at age 31.

👩‍🎓 Free Resource: Try our Introduction to Investing digital course.

Finance Latte AB is not a registered investment advisor. This content is for informational purposes only and should not be interpreted as investment or tax advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice. Past performance does not guarantee future results. Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment. From time to time Finance Latte AB might include affiliate links in its newsletter or website where we might earn a commission if you subscribe to a publication, or purchase a product you found through us at no extra cost to you. We will not promote any type of investment product, and will only include non-investment/non-finance services or products we believe in. View our Privacy Policy and Terms of Service.

Subscribe to keep reading

This content is free, but you must be subscribed to Finance Latte Newsletter to continue reading.

Already a subscriber?Sign In.Not now