Instagram investment portfolios – can I really cash in?

I’ll start with a disclosure – usually if it seems too good to be true, it probably is too good to be true.

Times have been really tough lately, and what with job losses, reduced salaries and furlough schemes, its no wonder that more and more we’re seeking ways to make and manage our monies. I have seen more and more accounts popping up on social media, talking about stock markets and guaranteed investments to make a return and I wanted to address why this might appeal, and what to really consider before parting with money – to make it.

What is it?

People set up social media profiles (mainly instagram), with images of their trading accounts and demonstrating how they are managing to make money from betting against stocks (going short) or making a new investment with the expectation of a return (going long).

So how is it supposed to work?

These people encourage you to join them – they claim to have the expertise to make the right investment decisions to make money. The idea is that they invest your money into the same securities they are investing their money in – ultimately resulting in financial gain for the both of you.

A friend of mine made money initially and stopped seeing a return afterwards and was told that it was normal for the returns to fluctuate and he will probably lose money. Is this right?

Possibly. Stocks and shares are extremely fickle and can be impacted by any change in circumstance. Brexit and Covid with people not being able to go to the shops or businesses no longer being within the EU are really obvious examples of a downturn impact. Less traditional market influence has been felt by cryptocurrency Bitcoin, which has seen a price rise, attributed to Tesla’s recent (and very public) investment. Volatility in the markets can be so clearly influenced by social media. Tesla’s own share price was consistently rising until impacted by a tweet. It may be able to capitalise on the bitcoin return now – but the investment risk played out in Tesla’s own share price. However, whilst influenceable, it’s unlikely to be by these instagrammers.

What should I watch out for?

  1. Any capital you ever invest is always going to be at risk. Whether a genuine investment platform or a fraudsters trick, any money you part with could result in a nil return. Any money you part with, you must therefore be prepared to lose.
  2. Google any investment claims they make, and value of shares or information you can on the individual. Whilst they may claim to drive a Maserati that they bought with their investment earnings, they could also take a photo next to a car anywhere.
  3. Look out for really high return on investment promises. Whilst there are definitely means to make money in the markets the higher return usually means the greater the risk – or that the return is not likely to be true.
  4. Ask up front what their fee or commission is and be wary for those offering a service for free.
  5. Take a look at the products they are investing in, and ask to take a better look at what they plan to invest your money into – and why they’re taking that route.

I still want to invest my money – what else could I do?

Turn to a genuine investment boutique or platform. Ask about their products, returns and what you can expect. Do some research. Whilst it may cost you a fee, there is a real and tangible organisation that you can work with to try and achieve investment success. It’s likely they will hold a range of low-high risk products and the lower the risk, the lower the possible return, but also the less likely to lose money and a good place to get started.

Compare these options to your investment intentions. If you’re just looking for something with a rate that is less awful that your ISA, you could also talk to the bank about bonds or other products they hold that you can try and make a return on.

Ultimately, investing is a risk and reward process, but you can better safeguard yourself by just taking at little more time. Not every claim is false but if you’re trying to make money rather than lose it, it’s worth a little extra research. Whilst I’m a prudent accountant, I still firmly believe the only way to get rich quick is if you win the lottery.

“The quickest way to double your money is to fold it in half and put it in your back pocket.”

Will Rogers

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