Dear Liz: I am in my early 60s and have a friend the same age who keeps telling me to invest in companies which she has found from looking at YouTube videos. She says that she picks stocks by seeing which companies are repeated over and over again in different videos. She claims she is making a 400% return. She tells me I am losing money by investing in safer products, such as certificates of deposit. First of all, is this a good idea to invest everything in stocks, when one is in their mid-60s to 70s, when retirement is on the horizon? Also, neither she nor I are working full time at the moment, so, the risk is great if the market goes up and down and the value of a portfolio changes. I’ve seen my retirement funds drop the last few years, even though they are ever so slowly creeping back up. Finally, what is your opinion on getting financial advice or stock picks from social media platforms?
Answer: Perhaps your friend is the next Warren Buffett. More likely she’s exaggerating her results or simply hasn’t dealt with a down market yet. Few investors can consistently produce outsize returns over time, especially when they’re essentially picking stocks at random.
In answer to your first question: It’s rarely smart to invest everything in any one thing, whether it’s stocks, bonds, real estate, certificates of deposit or alpaca farms. Diversification helps investors reduce risk. If one type of investment is performing poorly, another may be doing better.
Having some money in “safe” investments may be prudent, but you’re typically losing ground to inflation with low-return CDs or Treasurys. Most people will need to have at least some portion of their portfolios in stocks, before and after retirement, if they want to outpace inflation.
The post Q&A: So you’ve got a friend spewing investment advice from social media. Here are some grains of salt appeared first on Ask Liz Weston.
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