Check before you invest

In recent years, social media has played an important role in making investing more accessible. Financial influencers and content creators have helped bring investing into the mainstream, raising awareness and helping people better understand their finances.

However, the sheer volume of financial content now available means it can also be difficult to know what to trust. This is especially true when it comes to investing, where financial rewards and fast-moving events can create fertile ground for hype, bad advice and misleading claims.

With financial advice and investment tips increasingly appearing in our social media feeds, knowing what to trust has never been more important. Almost two-thirds (64%) of UK investors see financial content on social media at least once a week, while 18% say they have lost money after making an investment decision influenced by social media content.

Social media can be a valuable place to learn about investing, discover new ideas and hear from a wider range of voices - but, as with any source of financial information, it is important to know how to separate credible, useful content from misleading claims. 

IG is urging investors to check before they invest. If you see an investment tip online, ask: Who is telling me? What is the evidence? And what could I lose?

Three checks before you invest

Before acting on an investment tip you see online, take a minute to make three simple checks:

1. Check who’s behind it

There are plenty of knowledgeable and responsible financial creators sharing useful information online. But a big following, thousands of likes or a screenshot of impressive gains alone doesn't make someone an investment expert. Before you take an investment tip at face value, check who is giving it.

Ask yourself:

• Who is behind this account and what are their credentials?
•  Do they have relevant experience or expertise?
•  Are they being paid to promote something?
•  Could they benefit if I invest?
• Does the account have a track record, or has it appeared out of nowhere?

And remember - popularity isn't proof. Our research found that 25% of investors who trust financial influencers say a large following makes them more likely to trust their advice, while 24% are influenced by screenshots of a creator's own gains.

You can also check the FCA’s Warning List before investing to see whether the firm or individual behind an investment opportunity has been flagged by the regulator.

2. Check the claim

Even when information comes from a creator or source you trust, it is worth checking the evidence behind a specific claim. Pay attention to the style and substance of the content itself. Evasive or embellished language, excessive jargon and confident claims without clear explanations should all prompt you to look more closely. 

Ask yourself:

•  Have they used vague terms like “recent studies show” without backing up these claims with evidence or citations?
• What is the origin of the information? Is it primary or secondary, and can you find the same information from other credible sources?
•   Have they backed up their assertions with primary data and research from reputable, trustworthy sources?
•  Has anyone else reported on the topic or event from another angle?

Be particularly wary of claims that sound too good to be true. If someone is suggesting you can turn your money into two, three, four or even 20 times what you started with by “just doing this one simple thing”, don't rush in. Take a step back and check the evidence behind the claim before you invest.

3. Check what you’re actually buying

Understanding the person making the recommendation and checking their claims is only part of the job. Before investing, make sure you understand the investment itself.

Ask yourself:

•  What exactly am I buying?
• How does it make or lose money?
•   What are the risks?
•   What fees or charges will I pay?
•  How much could I afford to lose?
•   Would I still invest if I hadn't seen the post?

If you can't explain in simple terms what you're investing in and what could happen to your money, take a step back and do more research.

And remember - past performance isn't a guarantee of future returns, and no investment is without risk. Financial creators can be a useful starting point for learning, discovering ideas and engaging with investing.. Just don't let someone else's post make the investment decision for you.

1. Check who’s behind it.
2. Check the claim.
3. Check what you’re buying.