Editor’s Note: This past week, I came across a cautionary story on social media about trusting self-proclaimed financial experts. The story serves as a reminder for anyone thinking about following advice from supposed “gurus” online.

The Instagram Guru Trap

The story centers on someone who trusted an Instagram “guru.” This guru portrayed an image of immense success—flashy cars, piles of cash, and a luxurious lifestyle—all supposedly funded by his stock trading skills. The allure was strong, and this individual decided to take the plunge.

The guru offered a “lifelong membership” for $400, promising exclusive lessons and stock trading guidance. Without fully understanding the risks or verifying the credibility of the Instagram profile, this person paid for the membership and invested $1,000 based on the guru’s advice.

The guru advised buying Tesla (NSDQ: TSLA) options. Within a week, the $1,000 investment had plummeted to just $93. Alarmed, the individual reached out to the guru, only to be reassured that everything would be fine: “We have until Aug 30th on this trade,” he said. Presumably, that was the expiration date for the options. Trusting this response, the person held onto the position.

As those familiar with options trading know, proper due diligence is essential. Successful trading requires an understanding of the risks, market dynamics, and timing strategies. However, in this case, the individual relied solely on the so-called expert and did no research of their own. This lack of due diligence proved disastrous.

Promises Broken and Money Lost

When the options expired, the entire investment was gone. Afterward, the guru promised to help make the money back the following week. But when that time came, he disappeared—no responses to messages, no lessons, nothing.

After several attempts to make contact, the individual asked for a refund, though they knew it was unlikely. Eight days later, the guru finally responded, apologizing and saying, “We can make the money back slowly,” but stated that refunds were not possible.

Options can seem appealing to those seeking substantial returns, but they are incredibly risky for those unfamiliar with how quickly the markets can change. A 200% return can easily turn into a 100% loss in a short period. Without understanding the full extent of the risk, traders can lose everything they invest.

There are option strategies that are far less risky than simply trading options. For example, selling options in a covered call strategy can reduce the risk of stock ownership. Likewise, a cash-covered put strategy is a low-risk way to boost your returns with options.

Key Lessons Learned

This story highlights several important lessons. First and foremost, always conduct your own research before trusting anyone with your hard-earned money, especially on social media. Flashy photos and claims of wealth do not make someone an expert. It’s crucial to understand the risks involved and avoid relying solely on someone else’s advice, especially for something as risky as options trading.

Proper due diligence means verifying the credibility of any so-called expert, understanding the basics of the investment, and ensuring that the person advising you has a proven track record. If the individual in this story had taken the time to dig deeper, they may have realized that this Instagram guru wasn’t trustworthy. Unfortunately, the promise of quick riches often overshadows common sense.

Investing is inherently risky, and it is vital to approach it with caution. Always verify the source of your financial advice, educate yourself on investment strategies, and avoid falling for get-rich-quick schemes. Losing money is painful, especially if it’s because you trust the wrong person.

Read This Story: How to Beat Wall Street…Under All Investing Conditions

PS: Are you looking for an investment strategy that makes money regardless of current uncertainties? Consider the advice of my colleague Jim Fink.

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