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14 ‘Helpful’ Financial Advice That Can Actually Be Harmful

With countless sources of information at our fingertips, it’s easy for people to believe they’ve become an expert on a topic with just a few Google searches. When it comes to managing investments and finances, there is certainly no shortage of advice circulating on television, the Internet, podcasts and other media. However, some of this “expert” financial advice is not worthwhile, and some of it may do more harm than good.

When it comes to learning good financial practices, it’s important to be mindful of who you listen to and weigh the recommendations in the context of your unique circumstances. Indeed, some commonly repeated financial guidance is not widely applicable and may even be untrue. To help you point out some goofy generalizations to look out for below, the 14 members of the Forbes Finance Council each share a piece of “good” financial advice that can do more harm than help.

1. ‘Look for short sale opportunities.’

Short selling should only be done by sophisticated traders or better regulated. One example is the brief squeeze of GameStop stock. Investors who followed WallStreetBets lost billions in just a few days, as GameStop stock hit a high of $483 in speculative trading and a low of $112.25 per share in a single day — a measure of the company’s financial condition or operations. There was no physical change in the results. – Aviva Pinto, Wealthspire Advisors

2. ‘Act quickly!’

Used by millions of people, social media often explodes with unfounded data consumption. Unfortunately, the currency of credibility is often overlooked when it is in competition with a presentation. Consumers should shy away from any advice that pressures them to act quickly, whether the advice relates to income, appreciation or asset protection. There will be another opportunity to create wealth, as it has been before. – Dr. Jason Jackson, IBS Institutional Capital and IBS Investment Bank Sister Co.


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3. ‘Avoid all debt.’

The “experts” who claim you should avoid all debt are doing more harm than good. I’m not talking about debt used to buy goods, but debt used to buy assets that appreciate in value. Leverage is one of the most valuable tools of the very wealthy, especially when used to purchase assets such as real estate. Now more than ever, with rising inflation, borrowers win if they have a fixed rate loan. –Ben Fraser, Aspen Funds

4. ‘Hire multiple life insurance agents.’

Shopping for the right life insurance agent makes perfect sense. Buying multiple life insurance agents for the same policy on your part is a big mistake. This confuses the market and puts you in danger of not getting the best deal. For example, the market may think you are looking for several $10 million policies instead of one. Choose your agent and let that person make purchases on your behalf. –Michael Seltzer, Truth Group, LLC

5. ‘Try to time the market.’

Concern yourself with predicting businesses, and put your money in companies whose products the world will use more, not less, in five years. Investing in successful businesses that go through up and down cycles is a better strategy than trying to time those cycles. –Gerry Frigon, Taylor Frigon Capital Management LLC

6. ‘Make Journal Entries.’

Journal entries have one purpose: tax or month-end adjustments. However, if you do amend a Band-Aid problem in your books, you will need to find out where the process is going wrong from a transactional point of view. Take inventory as an example. Your quantity and value on hand should be linked to your balance sheet. If it doesn’t, you’ll need to look into what’s causing the problem with the workflow. – Marjorie Adams, Fourlane

7. ‘Follow the fire movement.’

Sending the average person—who may be risk-averse or resource-limited—into the FIRE (Financial Freedom, Retiring Early) movement may do more harm than good overall. For example, a professional may leave a lucrative job. This may work for a while, but an unforeseen event may require them to return to their profession, which can be challenging. – Dr. Philip Fischer, Micro Macro Infinity

8. ‘Retired people should not have stock.’

The biggest threat to retirees is the loss of purchasing power. Some long for the 1980s, when 30-year Treasuries paid 9% interest. Unfortunately, inflation was 13% – meaning that assets decreased by 4% per year. Only one security has proven itself over time: Stocks of well-run companies pay steady dividends as well as modest capital growth. – Eric Christman, Oxford Financial Partners

9. ‘Pay off all debts.’

Paying off all debt may be bad advice for some consumers, especially if it is a very low-interest loan or tax-deductible. One can often get returns with their capital that exceed the loan interest burden and can earn an incremental profit on debt servicing. This is a concept that the average person often misunderstands. – Dan Kapkovic, ARGI Financial Group

10. ‘Diversity, diversity, diversification.’

If an investor doesn’t already know what they’re doing, pursuing diversification means they’re adding more factors they don’t understand. This creates more confusion and reduces the responsibility of the investor. Diversification attempts to solve knowledge deficits, but the solution to knowledge deficits is to acquire knowledge, not to add to what a person does not already know enough. – Jerry Fetta, Wealth Dynamics

11. ‘Don’t miss the trend.’

,You should definitely invest in ‘X'” is the most dangerous advice one can get. Most people who follow this advice invest during the height of a bubble and are usually left with a large loss when the market corrects, selling and trying to realize the loss or return. Hope and hope it comes back. Chasing trends can be a very risky investment strategy. – Joseph Orseno, Tiltify

12. “Make sure to follow this budget.”

Trying to implement what you think without taking into account the way your personal mind works can make budgeting detrimental to your financial goals. Frequent budgeting is like crash dieting – it puts you in a cycle that only makes you feel incapable. Make sure your savings and spending plans make sense and are sustainable. – Faith Teop, Leveraged Retirement

13. ‘Use cash reserves to pay off debt.’

While efforts should be made to repay revolving debt like credit cards at the earliest, you need cash reserves to deal with emergencies. Asking someone to use all their cash reserves to pay off debt does more harm than good. A better way to pay off debt is to take a part-time job and dedicate those funds to paying off high-interest credit cards. –Jared Weitz, United Capital Sources Inc.

14. ‘Your risk profile means you should do it.’

Let your financial life be a journey, not just another destination. Don’t settle for cookie-cutter advice! I think it’s unfair to be put in one box and give the same exact advice as everyone else with a similar risk profile. Everyone’s situation is different. Many things have changed since the outbreak of COVID, and an understanding of the specific circumstances needs to be incorporated into the financial advice given and followed, and this advice should evolve over time. – Taruna Kanani, KB Tax Divisor CPA

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