Who Is Liable For (Bad) Free Investment Advice?

When it comes to free investment advice, you need to have very selective hearing. Why? Because most free investment advice isn’t really free, and ends up costing you way more than it is worth.

The SEC has warned investors in the past about scams involving pre-initial public offerings. People log into social media sites, such as Facebook, Twitter, and Groupon, telling people that they can get them early access to shares of upcoming IPOs. With the upcoming Facebook IPO, don’t be surprised if you see such claims.

While these types of scams can be prosecuted, what about the well-meaning financial website or blog that is trying to share experience? Or what about Jim Cramer and his show “Mad Money”. Should he, or any other investing website, be liable when making a bad call? Or is it buyer beware?

Regardless of whether you like or dislike him, Jim is trying to educate individual investors, which is a great goal. But we’re talking about real money here. George Mannes (money.cnn.com) wrote an interesting article about personal finance writers and their “responsibility” for the advice that they provide.

Since this site is about investing educating, it strikes very close to home. I think that both sides of this debate have valid points and counterpoints. But as George said:

As I have learned from personal experience, if people think I’ve given bad advice, word gets around pretty quickly.

The implication is that having a reputation for making bad calls will cause your following and/or sales to dry up quickly. This may be true, but doesn’t help people who acted upon a bad call and lost money.

In the end, there is no such thing as one-size-fits-all in the financial world. Everyone is different, which is why it is so critical for you to take what you learn and customize it for your personal circumstances.

Remember Safe Investing Principle #1: YOU must be responsible for your financial future. Investigate all the advice you receive (even the stuff you find on my site) and figure out whether you agree, whether or not you want to use it, and then HOW to use it.

I’ll leave you with a quote from Aristotle that seems appropriate:

It is the mark of an educated mind to be able to entertain a thought without accepting it.

    – Aristotle (384 BC – 322 BC)


Should personal finance writers be liable for bad advice?
George Mannes – CNN Money

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1 Response to Who Is Liable For (Bad) Free Investment Advice?

  1. June says:

    Well said.

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