Connect with us

Life Hacks

5 Important Questions You Should Ask Yourself Before Taking Any Financial Or Investment Advice Online

Not everything you read is gold.

Unlike in the past, there is an abundance of information available online today on virtually any subject you care to learn about.

Thus, it is little wonder that before we make any decision when it comes to our personal finances, whether its buying a new insurance policy, investing in a particular product, or signing up for a credit card or home loan, many of us do online research as part of our due diligence.

With low cost and talent barriers needed to create and run online websites, there is unfortunately an abundance of bad advice, fake news, poorly copied articles, and sneaky sales pitches everywhere – alongside plenty of gems and useful content.

Thus, it is more important than ever that consumers have the ability to evaluate sources and discern for themselves what advice to take and which to ignore when making important personal finance decisions.

#1 Does The Source Know What They’re Talking About?

It’s important to evaluate content on their own merits, but having an understanding of who’s behind the content can bring up red flags that indicate if a certain website is unreliable.

In “The Art of Thinking Clearly”, author Rolf Dobelli sums this up in this way: “True experts recognise the limits of what they know and what they do not know.”

Just as you shouldn’t take medical or health advice from a content marketing website or MLM distributor, I wouldn’t trust articles about CPF written by people who are clearly not from Singapore and write as all they know about CPF, or Singapore for that matter, is from online sources.

You probably should think twice if you read articles by an individual who makes confident predictions about what’s precisely going to happen in the global economy and claim to have “insider” information from a wide range of sources.

The point here is that the topic being tackled, and the information presented should match the writer’s expertise.

Professional journalists are a great example. They don’t claim to have any special insight or domain expertise, but they do in-depth research, ask the right questions, and present the facts.

Also immensely valuable are insightful bloggers who share their real-life experiences in financial planning and investing.

Read Also: Complete Guide To Finance Blogs And Websites In Singapore (2020 Edition)

#2 What Are The Writers’ Or Company’s Agenda And Interests?

Understanding who is behind the content you’re reading and what their interests are, financial or otherwise.

Is someone dismissing a DIY investing approach too easily because they hope to sell you a managed fund they represent? Is the article you read about a heart-breaking case study just a sales pitch by a financial adviser? Is a website possibly not giving you a full picture of the shortfalls of a certain product because they have existing commercial arrangements?

This isn’t to say that valuable, quality content cannot be produced by companies that offer a product or that writers cannot remain objective if there are financial interests.

But as readers, we should be aware of any potential conflicts of interest. Companies should do their part by being upfront with their users about financial arrangements so that readers can be armed with all the facts and decide for themselves.

Read Also: Independent Financial Adviser Vs Financial Adviser Vs Tied Agent: How are They Different?

#3 Every Person Is Unique, And What’s Suitable For Someone Might Not Be For You

Just as it wouldn’t make a lot of sense for you to buy a two-seater sports car if you need to ferry your family of five around, even though it might be a perfect car for someone else.

Before seeking to replicate someone else’s entire investment portfolio or buy the exact insurance policies they have, you first need to understand if these choices are suited for your investment and protection needs, including time horizon, risk appetite, and financial ability at this point in time.

Understand the principles under which other people make their decisions, and apply those to your own unique situation, and speak to a trusted professional when in doubt.

Read Also: 5 Investments In Singapore That Caters To Every Investor’s Risk Profile

#4 What Is The Advice Giver’s Track Record?

Whether it’s a financial adviser, financial blogger, or netizen you meet on the forums, it would be prudent to look at their track record and see if their advice holds up.

We all had that friend (or maybe more than one) who was posting every other day about Bitcoin and other cryptocurrencies that were going to make them rich. Might want to check in to see how those “investments” of theirs are holding up.

It is all right to make mistakes, and people who continue to learn from their mistakes would come out of times of difficulty much wiser and better equipped to handle other challenges in future. But these individuals are also humble and show prudence in advising you how to manage risk.

Read Also: SGX Orb Awards: Here Are The Best In Financial Content You Should Be Reading (As Chosen By SGX)

#5 Are Claims And Advice Based On Data?

Finally, it is well and good to articulate concepts that sound good on paper, but it also needs to be backed up with actual data and facts.

We can always disagree about philosophies and approaches, but we can only do so on the basis of actual data, otherwise, any claim or discussion would be as useful as discussing tactics on how to defeat Thanos. Fun for sure, but completely not applicable to real-life.

When evaluating the use of data, readers should also on the lookout for writers who “shoot the arrow and then paint the bullseye”. In other words, selectively pick data points that support their hypothesis.

Read Also: 5 Digital Tools To Better Understand Your Life Insurance Coverage Needs In Singapore

Levelling Up Our Media Literacy As We Level Up Our Financial Literacy

We will continue to rely on online research as we try to make sense of the bewildering array of products, services and approaches to help us make better, smarter financial decisions.

And to ensure we can make the best use of these resources, it is a necessity for us to be able to think critically, read widely, and put our trust in the right sources of information.

Here at DollarsAndSense, we will continue to strive to earn your trust and support every single day, one article after another. If you have any comments and feedback for the team, you can always reach out to us.