Investment Analyst Reacts to Finance TikToks

Misinformation on Investing in TikTok

• Richard Coffin, a registered portfolio manager with CFA and CFP designations, reviews finance TikToks to address misinformation and educate viewers about investing.

• He criticizes a TikTok claiming to reveal "four ways to avoid taxes legally," explaining that while certain business expenses can be deducted, this only applies to incorporated businesses and expenses must be reasonable and related to revenue generation.

Seeking Professional Advice

• He emphasizes that tax advice should be sought from professionals like CPAs, not from social media.

Index Funds vs. Individual Stocks

• He addresses a TikTok that criticizes index funds, arguing that while a few stocks may drive the majority of an index fund's growth, investing in index funds is still beneficial compared to not investing at all.

• He acknowledges that the S&P 500's recent returns have been heavily influenced by a small number of stocks, but emphasizes that index funds remain a valuable investment strategy.

Critiquing "Diamond System" for Stock Picking

• The video criticizes a TikToker who claims to have a "Diamond System" for picking stocks, which allows them to achieve high returns with only one hour of work per week.

• The analyst points out that the TikToker is cherry-picking data, showing only the top-performing stocks in their portfolio and hiding the underperforming ones.

• The analyst argues that it is incredibly difficult to consistently pick the top-performing stocks, as the index's performance is often driven by a small number of companies.

• The analyst compares finding the top-performing stocks to picking the best 10% of the S&P 500, highlighting the low probability of success.

• The analyst emphasizes that even professional analysts with teams of researchers often struggle to outperform the market, and that index funds offer a more diversified and less risky approach to investing.

Critiquing Tarot Card and Intuition-Based Trading

• The analyst also criticizes another TikToker who claims to use tarot cards and intuition to day trade options, highlighting the lack of evidence and the inherent risk involved in such an approach.

Critiquing "Higher Self" Investment Strategy

• The speaker discusses a TikTok video claiming a 21% return in 8 minutes by trusting one's "higher self." He points out that while there is research suggesting a correlation between stock market returns and lunar phases, this is likely just data mining and correlation does not equal causation.

• He emphasizes the importance of judging investment performance based on comprehensive long-term figures, not just one-off screenshots.

Critiquing Aspiring to be Like Bill Gates or Warren Buffett

• The speaker then criticizes the idea of aspiring to be like Bill Gates or Warren Buffett, arguing that true wealth lies in institutions like Goldman Sachs, Vanguard, and JP Morgan, which manage trillions of dollars.

Critiquing Silver as an Investment

• He mocks a TikTok video promoting silver as the best investment, comparing it to the "weird mental exercises" of the influencer space.

• The speaker acknowledges that silver has historically seen price increases during times of turmoil, but points out that it has not been able to reclaim its 2011 high.

• He contrasts silver with gold, highlighting that gold has generally outperformed silver in terms of price and returns over the long term.

Discussing the Social Value of Gold

• The speaker concludes by discussing the social aspect of gold's value, noting that while scarcity is often cited as a factor, other rarer metals like platinum have not achieved the same level of value.

Comparing Platinum and Gold

• The analyst discusses the value of platinum versus gold, arguing that platinum is undervalued despite having more industrial applications. He attributes gold's dominance to social inertia and a historical association with religion and financial institutions.

• He cites the book "Debt: The First 5,000 Years" by David Graber, which suggests that gold's societal value stems from its use in religious adornment and tribute.

Critiquing Grant Cardone's Real Estate Advice

• The analyst criticizes a video by Grant Cardone that encourages teenagers to buy real estate with their allowance. He argues that this advice is unrealistic and potentially harmful, as it prioritizes financial gain over childhood development and education.

• He emphasizes the importance of focusing on education and skill development, arguing that these are more valuable than chasing quick profits at a young age.

• The analyst expresses concern about the potential for such videos to mislead impressionable young viewers into prioritizing work over their well-being and development.