As scammers flood the internet with investment cons, it can be hard to know who and what to trust online.
Money Mail has exposed how fraudsters are targeting savers using the net to find a home for their money – including how scam adverts can be bought for less than £100.
But the internet can still be a useful tool for DIY investors, if you know how to tread carefully.
Web of deceits: But the internet can still be a useful tool for DIY investors, if you know how to tread carefully
Typing ‘investment tips’ into Google returns a staggering 700 million results in an instant. At the push of a button, you can surf stock picks for 2021, read about the top funds or learn how to start investing.
But in an age where any would-be Warren Buffett tycoon can set up a website or publish a blog, can you really trust investment tips you find on the internet?
Jason Hollands, managing director of investment platform Bestinvest, warns that savers need to be very careful.
He says: ‘There’s lots of valuable information available to investors 24/7, but it’s easy to get overloaded and difficult to spot misleading sites, out-of-date recommendations and poorly researched articles.’
Here, Money Mail outlines the pitfalls of going online for investment answers…
Check the source
‘When you’re using the internet for investment ideas, the quality of your sources is absolutely everything,’ says Mr Hollands.
If the article has been published by a traditional news website or a specialist investment publication, you know you are in safe hands. Likewise, if the source is a regulated stockbroker, fund manager or bank.
Reputable companies will be registered with the Financial Conduct Authority
But if you have not heard of the company or person sharing tips, you should dig deeper before following their advice.
Reputable companies will be registered with the Financial Conduct Authority (FCA), so check a firm’s website to find out if it is authorised to recommend investments.
This check will also help you identify scam or copycat websites.
Typing the company name into Google, followed by ‘review’, will give you a sense of whether other investors and experts think the firm is credible.
If the post is from an individual, it can be harder to verify.
Anyone can produce and publish a blog or vlog (video blog) by signing up to an online platform such as Word Press or YouTube. Investigate the blogger’s track record. Are they a columnist for a well-known newspaper or an expert from an FCA-registered company?
If the answer is no, you should ask yourself why this self-styled investment guru seems to be sharing their so-called foolproof share tips for free.
Are they being paid to promote a deal, or it is a scam?
Beware fake ads
Adverts that appear prominently in your search results should not be mistaken for credible articles or the best investment deal.
If you typed ‘what are the best Exchange Traded Funds’ (ETFs) into a search engine, the results would return ETF adverts from companies who have paid the most money for the highest advertising spot.
Furthermore, adverts can easily be placed online by scammers who promise high returns designed to trick you into parting with your cash due to the lack of online regulations.
Don’t rush: If you’ve seen investment tips online or read about them in a chat room, do not invest until you have done your own research
Just last week Money Mail revealed how easy it is for anyone to place an advert on Google for less than £100.
Opinion pieces or blogs may also be sponsored by a company, which means that the views are not the blogger’s own, but are there simply to promote certain products.
Sponsored articles tend to appear on social media sites such as Facebook, and it may not be clear they are a promotion.
Videos made by social media influencers could also show up in your Google search results. They are paid by companies to push products and could have little or no financial knowledge.
‘Clone fraud’ has boomed during the pandemic
Criminal gangs are using legit-looking clone sites to steal ‘big money’ from investors, according to a financial crime expert who explains how to protect yourself here.
Details of a firm, such as its real telephone number and website address, can be verified on the FCA register.
You should use these details to make contact with a firm to be sure you are dealing with the real one.
Crime expert and consultant Phil Rolfe is calling on tech firms, the finance industry and official authorities to work together to combat clone fraud
News grows old
Investment tips can become obsolete fast so always check the date of the article or post.
Michelle Pearce-Burke, co-founder and chief operating officer at Wealthify, says: ‘How long the article stays relevant depends on what you’re researching.
‘If you’re searching for the right fund for your portfolio then, as a rule of thumb, if the article was written in the past three months, it should still be relevant.
‘When researching stocks, the information has to be more current. The share price could rise or fall 10 per cent the day after it’s written, making that stock a completely different prospect than the one described in the article.’
Guides to investing entitled ‘Getting started’ or ‘Five basic principles of investing’ stay in date for longer. But it’s worth sticking to guides written in the past two years.
Chat room talk
Online chat rooms like Reddit, or social media platforms such as Facebook and more recently Clubhouse, where investors listen to people talk about investing, can be fun for discussing ideas. But take tips with a pinch of salt.
Chatroom users often use an alias or post their comments anonymously, so you don’t know who you’re talking to.
‘There are many forums that host genuinely interesting conversations about finances and investments, but it is important to remember that investing is a one-man or woman’s race,’ says Myron Jobson, personal finance campaigner at broker Interactive Investor.
‘It is easy to get caught up in the hype around investments discussed in forums, but the suitability of the proposition is wholly dependent on your attitude to risk and the length of time you plan to invest.’
If you’ve seen investment tips online or read about them in a chat room, do not invest until you have done your own research.
There is a lot of information available on big fund supermarket websites. Just type the name of the fund or share you are interested in into the search box.
Always check the total cost of the fund — known as OCF or ongoing charges figure — how it has performed against its benchmark index and exactly where your money is invested.
It’s also a good idea to read analysis on the wider fund sector.
For shares, check the company’s financial statements for key financial information, such as dividend payments.
Analysts will also regularly provide views on who is buying, selling or holding stocks.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.