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Fake News And Your 401(k)

Another revival could be in store for ImmunoCellular Therapeutics. When this news article ran, ImmunoCellular Therapeutics’ stock price was $42.8. Within 5 months, it had risen 263% to $155.2. (1) Now, shares are selling for just over $1. (2)

What happened? Fake news. The misleading article had been financed indirectly by the company itself in order to boost stock prices, and it worked. 

Proliferation Of Fake News

Fake news has been around since the boy who cried wolf. However, modern social media has allowed it to spread like wildfire, enabling it to impact culture and individuals in ways never before seen. 

By the time ballots were being cast in the 2016 election, fake news was receiving more attention than mainstream media articles on social media giant Facebook. (3) A Pew Research Center survey found that 64% of American adults say that fabricated news stories cause a great deal of confusion about the basic facts of current issues and events. (4)

How much of an impact is the proliferation of fake news having? While most of us won’t walk into a pizza parlor with a shotgun because of what we read, it can lead to damaging financial decisions. 

Financial Effects Of Fake News

Just like the article about ImmunoCellular Therapeutics, every day articles designed to deliberately mislead the public are being published. And they are causing problems. Fifty-eight percent of respondents said that fake financial news is a serious threat to their financial decision-making in a recent AICPA study. One-third (33%) consider the threat “very serious.” (5)

In the financial sector, much of the fake news is generated in an attempt to manipulate stock prices. The SEC has taken note and is cracking down. They have recently filed charges of fraud against three public companies, seven communications businesses, nine writers, and two chief executives for participating in a “sophisticated stock promotion scheme.” (6)

As we saw with ImmunoCellular Therapeutics, people are buying into these schemes. How about you? How do you make decisions regarding your 401(k)? Could fake news be leading you to make poor decisions regarding your 401(k) investments?

How To Recognize Fake News

If you read any news at all, you need to know how to distinguish reliable sources from fake news. It’s not as easy as it once was. Fake news promoters are even replicating reliable source’s websites, down to the exact fonts and everything. 

Here are some things to look for when trying to decide if news is trustworthy: (7)

  • Consider the source. Is this a reliable news source? Does the website accurately depict a real company? Is there information identifying it as satire?

  • Read beyond the headline. A lot of people share articles on social media without even reading beyond the headline. Headlines are designed to get attention and don’t always accurately reflect the content of an article.

  • Check the author. Does the story have a byline? If so, read the author’s “about” page. Many are clearly fictitious if you take the time to read them.

  • What’s the support? A lot of fake news will cite sources, but inaccurately. If you double check sources you will see if they actually back up the claims made in the article.

  • Check the date. A lot of fake news is based in reality. Sometimes writers take old information and try to apply it to modern events. If you are reading about stock information, make sure it is current.

  • Recognize satire. Sometimes articles written as satire are taken seriously. In 2012, a Chinese media outlet mistakenly believed The Onion’s declaration that North Korean leader Kim Jong Un was “the sexiest man alive for 2012.” (8)

  • Consult the experts. If you’re unsure of the reliability of an article, check one of the following websites:

    • Factcheck.org

    • Snopes.com

    • Politifact.com

    • The Washington Post Fact Checker

How To Combat The Effects Of Fake News

When you see breaking financial news, you probably want to act quickly. After all, 77% of the AICPA’s survey respondents said that it’s important to make financial decisions quickly when new financial news becomes available. (9) But acting too fast could lead you to fall for fake news, which would be detrimental to your 401(k).

If you want to avoid financial mistakes based on fake news, you need to learn to recognize fake news in the first place. Use the above tips to check your sources before making a move. 

The second thing you should do is to work with an experienced financial professional. A highly educated CERTIFIED FINANCIAL PLANNER™ can tell you whether or not your news stories hold any water and help you think through your decisions. They can help you apply wisdom, instead of emotions, to your 401(k) decisions.

If you are interested in working with someone experienced and knowledgeable in the world of finance, give me a call at (717) 283-4186 or email me at dniggel@keywealthpartners.com. Let’s schedule a “Get Acquainted” meeting where we can discuss the validity of what you’ve been reading in the news lately and how that translates over to your retirement savings.

About David

David Niggel, CFP®, ChFC®, AIF® is the founder and president of Key Wealth Partners, LLC, an independent wealth management firm serving individuals, families, and business owners. Along with over a decade of financial services experience, he has advanced knowledge and training in providing holistic financial planning with fiduciary and ethical care, holding the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Accredited Investment Fiduciary® certifications. With hands-on entrepreneurial experience, he has the unique ability to help clients meet both their individual and business goals. Based in Lancaster, he serves clients through the York, Harrisburg, Hershey, and Central, Pennsylvania areas. Learn more by visiting www.keywealthpartners.com or connecting with David on LinkedIn.

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(1) https://www.ft.com/content/a37e4874-2c2a-11e7-bc4b-5528796fe35c

(2) https://www.google.com/search?q=immunocellular+therapeutics+stock&oq=imm&aqs=chrome.0.69i59j0l2j69i57j0l2.1173j0j7&sourceid=chrome&ie=UTF-8

(3) http://www.businessinsider.com/fake-news-outperformed-real-news-on-facebook-before-us-election-report-2016-11

(4) http://www.journalism.org/2016/12/15/many-americans-believe-fake-news-is-sowing-confusion/

(5) http://www.journalofaccountancy.com/news/2017/apr/fake-financial-news-201716537.html

(6) https://www.ft.com/content/a37e4874-2c2a-11e7-bc4b-5528796fe35c

(7) http://www.factcheck.org/2016/11/how-to-spot-fake-news/

(8) http://www.cnn.com/2012/11/27/world/asia/north-korea-china-onion/

(9) https://www.washingtonpost.com/news/fact-checker/?utm_term=.2d003af3e0b4