Financial Experts Debunk TikTok's Viral Money Advice

With Bitcoin and a gazillion other cryptocurrencies being all the rage at the moment, it’s natural that people want to get involved with these and other apparently easy ways to make money. Who doesn’t love fast cash, right? 

FinTok – sometimes known as StockTok – is the corner of TikTok where a motley crew of Robinhood traders, hobbyists and ‘finfluencers’ dispense financial advice to any and all who seek it out. Some users even have hundreds of thousands followers and millions of views. But do the people giving out advice have any clue what they’re talking about?

We asked actual financial experts to critique some of the most commonly repeated tips and hacks found on FinTok so you can decide once and for all whether or not you can make millions of dollars by stealing soap from hotel rooms (seriously).

One of the most frequent pieces of advice given on TikTok is to buy properties, “flip” them and either rent them out at inflated rates, or resell them for profit. According to Tanja Hester, a personal finance writer and author of Wallet Activism, this isn’t as easy as people make it sound.

“It is technically possible to make lots of money investing in rental real estate,” she says, “but the folks pushing this tend to massively oversell how easy it is, or call it ‘passive income’ when it actually requires a lot of active effort to manage a property.”

“To make a lot of money, you have to be comfortable carrying a massive amount of mortgage debt on multiple properties, and you could be in extremely bad shape if an economic crash comes that makes it hard to find tenants or the tenants can’t afford to pay rent – something we’re seeing right this very moment thanks to the pandemic.”

Real estate advice tends to be steeped in classism and exploitation, as the properties cited as ideal for investment are usually in a poorer neighbourhoods, where home prices are low and rents are relatively high because people can’t afford to buy. 

“Real estate investors look to make as much in rent as they can off people who can least afford it, often being quick to evict them if they fall on hard times,” Hester says. “If you’re going to go into rental real estate, it’s so important to remember that it’s not just an investment, it’s someone’s home. Anyone considering taking this advice should ask: Is it really your mission in life to get rich off of exploiting poor people?”

Dropshipping is a relatively recent money-making scheme, involving buying shite quality tat off websites like AliExpress and flogging it at a higher price on eBay, Depop or custom Shopify websites. The idea is that you don’t have to handle any warehousing costs since you just order the item directly off AliExpress to the customer. While it sounds lucrative, is it actually a good way to make money?

“My short answer is: not really,” says Toby Mathis, a founding partner of Anderson Law Group and author of the upcoming book Infinity Investing: How the Rich Get Richer And How You Can Do The Same. “It is possible, but I give the odds of success about 5 percent, as these types of programs generate your own competitors in the exact same product categories you would be selling, no matter how niche.”

According to several TikTok users, including the teenaged @ecomjoshcarter, the only reason that people don’t get rich like him is because they’re not following the right kind of lifestyle for success. In one video (which garnered 60,000 views), he preaches that poor people “party 24/7, don’t learn how to make money online, and believe a job will make them rich”, while him and his followers “make 30k+ a month, work two to four hours a day, becoming our own boss”.

Hester begs to disagree. “The biggest predictor of whether you’ll be rich in adulthood is being born rich, and these stories rarely tell the whole story like how much help they got from their parents or family, or even seed funding they got from rich people they know by already being in those social circles,” she explains.

“Accusing low-income people of being lazy or being extravagant spenders is just straight-up classism and racism. Research shows that low-income people are far better than rich people at budgeting and managing their money, and they’re much more likely to work multiple jobs to make ends meet, which hardly qualifies as laziness.”

Mathis also doesn’t condone having your whole net worth in crypto, despite what FinTokkers and my old housemate might claim. “Crypto is not an asset, no matter what the IRS or people say,” he argues. “It is essentially a currency and should be treated the same as gold, silver or dollars. My advice is to have 10 percent of your net worth in cash or cash equivalents, so crypto would likely be 1-3 percent of a prudent investor's net worth. For cryptos other than established ones like Bitcoin and Ethereum, treat it like gambling. You need to be okay with losing it all if you want to play.”

A pervasive myth knocking about it the idea that day trading (AKA buying and selling certain stocks within a single day) is a good way to make money since you can time and “predict” the direction of the market trends. Of course, you can’t be an Aldi version of Jordan Belfort and still work full-time, so something’s gotta give, right?

“You can technically make money day trading,” says Dominique Broadway, a financial expert  specialising in teaching about stocks, trading and investing. “However, most people are not successful if they don't truly know what they are doing and most people have issues with greed, which limits their profits and often makes them lose more money than they make.”

Toby Mathis strongly advises against day trading, even for professionals. “In the US, the chance of making money ‘timing’ the market is about 5 percent. Over 90 percent of day traders will lose money. I can safely say that even with experienced traders, the success rate trying to day trade or time the market is less than 20 percent and is really closer to 10 percent. You are better off gambling.”

Trying out TikTok advice can be a fun thing to do occasionally, so long as the worst case outcome is making an inedible feta pasta or a clay ashtray, as opposed to blowing thousands of pounds of your own or other people’s money investing in things you don’t quite understand. Not everyone giving you advice has your best interests at heart. Even if they do, they might not have a clue what they’re talking about. 

“Why is this person sharing this piece of ‘advice’? Maybe they're just a giver. But more likely, there is a course, e-book or programme to be bought,” says Brendan Dooley, the president and founder of Meaningful Wealth Management LLC, a boutique financial planning firm in Philadelphia.

“Asking yourself why somebody would share a tip that makes other people money isn't just a cynical approach. Investing is largely a zero sum game. Your profits come at someone else's expense. So you should proceed with caution when someone's offering money-making tips for free.”

If was easy to make money renting out property, day trading or even dropshipping, everybody would be doing it. “These methods can work, and surely have for some people. But you should not approach these as get-rich-quick plans. Anything that seems too good to be true, probably is,” says Dooley.

In short: Don’t trust advice you see on TikTok, even if it’s coming from someone with thousands of followers.