We are receiving an increasing number of complaints about the White Coat Investors Facebook group being “full of people” who promote bad investing ideas that run counter to everything we write on the blog, say on the podcast, or teach in our courses. It is getting to the point where the posts are not just distracting to those looking for high-quality financial information, but actually misleading novice investors as to appropriate investing techniques.
We had hoped that group members would overwhelmingly point out to people posting on these topics why their idea is a bad one. Unfortunately, that has not happened as much as it needs to, despite spending years trying to educate and inculcate that culture in the group (although we appreciate those of you who have tried to do so). We refuse to let something with our name on it be used to provide investing misinformation, so recently we've decided to do a little more about it than we have in the past.
We also want to take this opportunity to invite and welcome anybody back to the group who has left it as a result of these distracting and misleading posts in the past. Of course, we also invite anybody who qualifies (high-income professional, partner, or trainee) to check the group out. You should also check out the WCI Forum and the WCI Subreddit while you're at it. Recent events in the FB group aside, these groups are all excellent places to ask and answer financial questions with colleagues. Today's post may sound a little negative, but overall there is a ton of good done in these online communities.
Just this week I saw a great example of that good being done. The thread below displays thoughtful, kind, and respectful interactions of our FB members helping each other out. As you can see, a little grace goes a long way, as does an attitude of “there are no stupid questions, only questions that some people know the answer to and some don't yet know”. This is what the group is all about.
White Coat Investors Group Complaints
Now, let's talk about the issues in the Facebook Group for a few minutes and the changes we'll be making there. Let's start with some examples of complaints we've recently received about the group:
Read More Here:
Here's another complaint:
Sometimes the complaints are a little more snarky like this:
We see posts like this too:
Which seems to suggest that what we viewed as tolerance for alternative ideas is being interpreted as indifference. We're certainly not indifferent on these topics. This “extreme tolerance” is even being talked about elsewhere on the internet on other forums and on Twitter. Here's an example:
Let me highlight that:
It's just a horrible reflection on what WCI has built.
When it gets to the point where it is affecting the reputation of the group, the reputation of the company and its employees, and my own personal reputation, it's obviously time to do something about it. We're not sure why this culture sprang up in the Facebook Group but not on the WCI Forum or subreddit, but it certainly did. We recognize that some people will view this as “censorship” and may even leave the group over it. That's unfortunate, but it's a free country. If your primary purpose in coming to the group was to discuss individual stocks and Bitcoin, you'll probably be happier elsewhere, to be honest.
It's not all that draconian, anyway. We're not currently planning to delete your post or throw you out of the group. We're just going to close your post to new replies. And maybe delete any replies it received before our moderation team saw the post. We'll also post a link to this blog post so you know what happened and why. If you want to complain about it, you can do so in the comments section below this post or send me hate emails. But you can't complain about the moderation policies in the Facebook group.
There are plenty of places on the internet where you can discuss these topics, including forums, Facebook Groups, and subreddits. But there are precious few where you can get solid investing information from your colleagues in a safe, accepting way. We already have rules against rudeness, profanity, and bullying. We also have rules against soliciting business (unless you're an identified, paid sponsor in the group) and posting on political or highly inflammatory professional topics. Now we're going to add rules outlawing posts promoting bad investment ideas.
For now, there are only two categories of posts that we're going to moderate in this manner:
- Individual Stock Picking
Although we certainly reserve the right to add other items (market-timing? actively managed mutual funds?) to the list later.
In this post, I will talk about each of these two topics. With each topic, I will also give some examples of posts that will be moderated moving forward.
Here are some examples of threads that will be moderated.
If your research into picking stocks consists of asking people on Facebook if you should buy it, that should be a clue that you do not have some sort of special insight that would allow you to be one of the very few on this planet likely to beat the market with your stock-picking prowess.
I actually really appreciated the comments on this one, so I included them. If every time a question like this was posted in the group the comments looked more like this than what they frequently do, there would be no need to take this more aggressive moderation stance. The proper answer to a question like this is “Are you aware of the data suggesting that may not be such a great idea?” and including a link to the data.
Can anyone share a “hot stock tip with me please?”
Sounds smarter, but it's really just another “Hot stock tips please!” post. And people are jumping on the bandwagon (“following”). My favorite part was the suggestion to buy a stock because Bill Gates bought it. Newsflash! That is not any sort of intelligent, rational analysis of the prospects of a company.
Sometimes, it sounds even more sophisticated, like this post:
This poster is quick to point out he's not one of those “AirBNB folks”. Then he goes on to promote ideas like buying stocks expecting rapid 5-10X returns, buying Bitcoin mining stocks, etc. The fun part is that he “understands index investing” (obviously not true) and how he says he's not speculating because “those are real returns”. Nobody ever said you can't make money speculating, but that doesn't make it a good idea.
These sorts of posts are having real effects on real doctors and their finances. They start wondering how they can learn to pick stocks too and which platforms they should open accounts with to do so. Some more examples:
You are not doing this person a favor by answering this sort of question with “Robinhood” or “eTrade.”
Again, “Hot stock picks please!”
It might not be as unpopular as you think (and as it ought to be).
If you're using a broker that you call to buy any sort of publicly traded security, you're doing this investing thing all wrong. If you need “instant” stock trades, again you're doing this all wrong.
I've been writing about the follies of picking individual stocks (much less trading them) for years on the blog, in the newsletter, on social media, and in my books. I talk about it on my podcast, on the Youtube channel, in my courses, at my conference, and during live presentations all across the country. Apparently, some people have missed the memo. Stock picking is a bad idea. The vast majority of people (which almost surely includes you) should invest in the stock market through a boring static asset allocation of periodically-rebalanced, low-cost, broadly-diversified index funds/ETFs. Those precious few who can select stocks well enough to beat the market in the long run in a risk-adjusted way after taxes and other costs (including the value of their time) should not just be investing their own money. If you're not sure whether you are in the vast majority here or the tiny minority, carefully track your returns over a few years and compare them to an index fund consisting of similar stocks. If you lose, dump your strategy and go buy some index funds. If you win, go open a hedge fund and become a billionaire.
Read more here:
- Uncompensated Risk
- Picking Stocks Is a Loser's Game
- Why Talking About Individual Stocks (and Sectors) Makes You Look Dumb
- Avoid Actively Managed Mutual Funds
- People Still Believe in Active Management?
- Active Mutual Fund Managers Are Not Getting Any Better
- 10 Reasons I Invest in Index Funds
- 150 Portfolios Better than Yours
- The Dangers of RobinHood
The speculative instrument du jour is cryptocurrency given the rapid rise in the price of Bitcoin and its peers in 2020. However, there are plenty of other speculative instruments out there. I'm not necessarily against you putting a small percentage (single digits) of your portfolio into speculative investments (commodities, precious metals, currencies, or even cryptocurrencies) as some sort of hedge in the portfolio. Nor do I pretend to know whether Bitcoin is next going up or down. But when I go into the Facebook group and 10 of the first 12 threads I see are about Bitcoin by a handful of enthusiasts overrunning the entire group, something has to be done. I wouldn't necessarily accuse them of running a “pump and dump scheme” or just coming in to brag about their most recent bet that paid off, but the impression being given to new people coming to the group is that buying a bunch of cryptocurrency after an 800% run-up is a normal, intelligent, rational way to invest. We don't want to be associated with that. If it was a post or two a month talking about how someone is thinking about putting 3% of her portfolio into Gold and 3% into Bitcoin or even if all of these posts were combined into one big huge long thread, that would be one thing. But that isn't what is happening here. Check it out:
If there is one thing a gambler doesn't want to feel, it's being alone. If you've got to lose money, you don't want to be the only one. Plus, if you can get other people to also get excited about buying what you already own, that's not a bad thing! I had to laugh when I saw this response posted on one thread:
Of course, there's more than just Bitcoin out there with hundreds of cryptocurrencies available. There's Ripple (XRP) too.
Just like with stocks no one reliably knows which one is going to go up and which one is going to go down in value. There's also Ethereum:
You can almost feel the excitement in the air. It's like there's a tulip bulb auction right around the corner. You can even buy a cryptocurrency “index fund”.
The expense ratio is only 2.5%. I don't see what the big deal is when it goes up 20% a day! There's TaaS too:
There are even stablecoins if you want less volatility.
More frequently, the posts are less a direct exhortation to buy some cryptocurrency yourself as a news event that seems to provide legitimacy to the speculative instrument. This is particularly common with Bitcoin. Here are some examples of that:
This one isn't even true (Fake News!) Mr. Okung is simply taking a big chunk of his salary and buying Bitcoin with it. He's certainly not the only one doing that!
The headline is always “Mass Mutual buys $100M of Bitcoin”. It's never “Mass Mutual Puts 0.015% of its Assets into Bitcoin”. Look, if you want to put 0.015% of your money into Bitcoin, I'll be the last to object. If your net worth is $1 million, that's just $148 in Bitcoin. Here's another article:
I don't think the article looks particularly interesting nor from a particularly good source, but I'm not against the posting of articles I don't like. Unfortunately, what happens is that every time an article like this is posted the same thing happens. An argument inevitably begins “Crypto is awesome!” on one side and “Crypto sucks!” on the other. Meanwhile, nobody is actually answering the reasonable questions white coat investors come to the group to ask and novices are wondering if they should be spending more time researching cryptocurrency on the internet instead of getting their disability insurance in place and doing some estate planning.
It's “**Breaking News**” so it must be important, right? Sometimes a post seems designed just to incite FOMO (Fear Of Missing Out), like this one:
Look, if you need someone to tell you that it might not be a good idea to buy something AFTER it goes up 294% in a very short time period, you're really going to struggle with this investing thing.
Sometimes the Tesla fanboys and the Bitcoin fanatics really get into it. People getting interested in something because the price went up rapidly? Nah, couldn't happen.
Long diatribes justifying speculative activity are also going to have their comments turned off. Here's an example:
These sorts of posts have real effects on real people. Here are two examples:
Sorry, we're not going to let something designed and built to help white coat investors hurt them. Naturally, whenever a speculative instrument soars in price, you hear back from anyone and everyone—”I told you so!” But you never hear from them when the price falls. It's the classic cocktail party conversation.
More information here:
- Limit Your Investment in Gold
- 5 Reasons I Don't Invest in Bitcoin
- Cryptocurrencies like Bitcoin Are Not Investments
Summing It Up
I hope this post helped you understand the reasoning behind the new, more aggressive moderation stance in the Facebook Group on these two subjects. We will make further adjustments moving forward as needed. You are welcome to express your appreciation or disgust for this change in the comments below this post. Just know that over a thousand people liked the announcement within a few hours of making it, so it's probably not going to change any time soon.
Feedback is always appreciated. You can also talk all about the merits of stock-picking and cryptocurrency all you like in the comments below this post. But you can no longer do it in the Facebook Group. If you have left the group in the last year or two because of posts like these, we'd like to welcome you back to a more rational, welcoming group of white coat investors. We hope this helps the Facebook Group further fulfill its mission to help you get a fair shake on Wall Street.
What do you think? Like the change? Hate it? Or just can't resist talking more about Tesla and Bitcoin? Comment below!