Choose your (finance) heroes wisely.

-by Pratik Bajaj

Kim Kardashian is promoting a cryptocurrency, which is likely to be a scam. Investment advise and tips are being found in the most unlikely places. Dumbed-down information is unmindfully posted and, worse, put into play. A classic case of zero credibility and zero accountability. One big problem I have with few influencers is that how oafishly they consider their audience to be dumb. Isn’t the whole idea of “influencing” based on the hypothesis of making smart audience smarter? In the name of simplification, influencers tend to over-simplify financial concepts to an extent that it is actually harming investors. Nitin Kamath, the founder of Zerodha, has been vocal about this. He is a thought leader we need at these times. Unlike Zuck, who now reluctantly agrees that FB is out of anyone’s control, Nitin is constantly improving his own brainchild to make it a responsible machine. The recent introduction of “kill switch” is a prime example of his astuteness.

An influencer marketing report by Business Insider Intelligence forecasts influencer marketing spends to hit $10 billion by 2022. 74 percent of consumers say they would spend up to Rs.45000 on a product recommended by an influencer. With such authority over the consumers, influencers are bound to sway their followers’ interests in financial investments and blanket investment advice which is downright criminal. A smart millennial investor has to realize that the number of views has nothing to do with real financial acumen. There’s a towering difference between research and analysis and re-hashing it in a 30-second video. Tell me, if you want to improve your health, will you visit a doctor or a graphic designer?

Investing is more about managing risks than returns. So when someone is promoting to download an app or offering to save your time, money, or effort, understand the underlying risks. As they say, if it’s free, you are the product. The downside to falling for a fashion trend is limited to the price of clothes but the downside to following any wrong career or money advice is colossal. At Valuationary, the primary goal has been to make our candidates informed, without a catch. Even when we jumped on the bandwagon of Instagram reels, we made sure that we’re mindful of the information we provide because it’s very easy to be misinterpreted. We are conscious in terms of who we partner with and how.

So often do we hear, “look at the companies around you, look at the products you use daily and invest in them” or worse “Put your money into index funds and forget”? For a first-time investor, even those investments can be very detrimental to her portfolio because valuations play a big part in an investing journey. Quality comes at a price. If we are buying something worth Rs.100 at its market price of Rs.150 in anticipation of it turning into gold, we are fooling ourselves. Look at the below chart of gold. Someone who had invested in Gold (because it was gaining momentum and looked lucrative) in 1980 did not make any money for the next 30 years. Investing essentially is a boring task and whenever humans have tried to gamify it, investors have lost money. May it be the first equity instrument, i.e. South Sea Company, or may it be gold as an asset. We have exploited instruments till we find excitement in something else. On the back of a few very influential people, we are doing something similar with cryptos currently.

So how can personal finance newbies differentiate between good and bad guidance?

• Know who you’re getting advice from. A quick internet search will likely tell you enough about an individual to indicate whether or not they’re qualified to be talking about personal finance. Check whether they have completed the degrees (CA/CFA/CFP, etc.) that they claim to hold, check whether they are SEBI registered investment advisors or research analysts, check their work experiences, it speaks volumes about the person. If they haven’t done anything practically themselves, who are they to tell you what you should be doing? Also, beware of those pages which disclaim “not a SEBI advisor” but come out with advice every day.
• Don’t fall for FOMO. Don’t lose lifelong savings to a trend. If someone is saying you can double your money in a month, it’s undoubtedly a scam. If your gut tells you something is off about it, that person is probably not to be trusted.
• Don’t act on blanket advice. There’s absolutely no cookie-cutter advice that can claim: what works for Mungerilal will also work for Jamnalal. If anyone is giving you blanket investment advice, it’s more likely that they are making more money out of you than you making any money from their tip. You are a unique investor with a unique risk appetite. Understand yourself, it acts as a prevention to falling for traps.
• Lastly, don’t expect to learn everything in 30 seconds. Think of a video as an introduction to a topic or concept to explore further. I admire a few financial influencers who try to inform the audience about possibilities that they can then explore. I have never seen Pranjal Kamra, Rachna Ranade, Akshat Srivastava, Aviral Bhatnagar, or Ankur Warikoo misleading their audience into an investment product that they wouldn’t otherwise use.

We all need heroes in our lives. We want to cling to people who can tell us what we need to do. But let’s choose our heroes wisely. Because it’s Gotham out there.