Hilariously bad investing advice I’m avoiding right now

As the war escalates in Eastern Europe, plenty of bad investing advice is emerging on social media. Zaven Boyrazian explains the risks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The stock market is a pretty complicated place, and unsolicited investing advice can be found seemingly everywhere. Yet that doesn’t mean it’s of high quality. That’s especially true when it comes to social media platforms, with many individuals advocating buying Russian mining stocks while their share prices are down. In my opinion, this investing advice is tragically flawed. Let me explain why.

Bad or good investing advice?

Evraz and Polymetal International are two of the largest mining businesses in the FTSE 100. Or at least they were, since both have now been removed from the index, and their respective share prices have plummeted by 73% and 92% in the last 12 months.

What happened? Well, both firms primarily operate within Russia’s borders. And with Western sanctions ramping up following the country’s invasion of Ukraine, these companies have been caught in the crossfire. So, it’s not surprising to see a massive sell-off from investors. But is this an over-reaction?

Should you invest £1,000 in Afc Energy right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Afc Energy made the list?

See the 6 stocks

That’s what some social media investing advice would suggest. After all, most of the extraction sites aren’t near the conflict. And with inflation, alongside demand for raw materials, skyrocketing, metal prices are going through the roof. So surely now would be an excellent time to buy these shares while they’re on discount?

That certainly seems like sound logic. But unfortunately, the situation is a bit more complicated.

Why I’m avoiding Russian mining stocks

This investing ‘advice’ is accurate in that most of the mining operations belonging to Evraz and Polymetal aren’t directly exposed to the ongoing crisis in Ukraine. However, indirectly, there’s a problem.

Mining is a notoriously capital-intensive process that often requires a heavy amount of external financing. This is typically secured through debt. But with sanctions cutting off the Russian banking system from SWIFT — an international payment & transaction network — securing such funding is becoming exceptionally challenging.

Evraz recently had trouble paying off its debt, not for lack of trying. An $18m bond coupon payment was blocked on Monday by the Office of Financial Sanctions Implementation (OFSI). The matter has since been resolved. But if the situation in Ukraine continues to escalate, future blocked payments to debt holders, creditors, or suppliers could create substantial problems for both of these businesses.

Both companies have large lumps of cash on their balance sheets, which should be enough to keep operations running throughout most of 2022. This liquidity is obviously an encouraging sight, given the situation. However, as things currently stand, the mid-to-long-term fate of these Russian mining businesses is being determined by external factors completely beyond managerial control. Hopefully, the situation in Ukraine will come to a quick and peaceful conclusion. But when will that happen is anyone’s best guess. In the meantime, these companies are being financially squeezed.

Personally, that’s not something I’m interested in adding to my portfolio. And it’s why I think such investing ‘advice’ is just plain awful. In my opinion, there are far more lucrative and less speculative investment opportunities for my portfolio elsewhere.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Afc Energy right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Afc Energy made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature black couple enjoying shopping together in UK high street
Investing Articles

Here’s how a 50-year-old could aim for £1,400-a-month passive income from an ISA

Investing in a Stocks and Shares ISA is one way to target long-term passive income, even for those hitting their…

Read more »

Investing Articles

After hitting a new 52-week low can the Diageo share price ever recover? See what the experts say

Harvey Jones has taken a beating on the Diageo share price, and there's no end to his misery in sight.…

Read more »

Investing Articles

Should I cash in my Rolls-Royce shares?

This investor in Rolls-Royce shares is wondering whether now might be the best time to sell up and move on…

Read more »

Investing Articles

With gold above $3,000, is it time to consider buying this FTSE miner?

Here’s one FTSE 100 stock that should -- in theory -- benefit from the current global uncertainty and a rising…

Read more »

Investing Articles

3 possible ways to generate a £1k monthly second income in the stock market

Our writer outlines a trio of approaches someone could take to try and build a four-figure monthly second income from…

Read more »

Investing Articles

Is the booming BAE Systems share price a deadly trap?

The BAE system share price has been a huge beneficiary of today's geopolitical uncertainty but investors considering the stock should…

Read more »

Investing Articles

Thank you stock market: a rare chance to consider buying Nvidia stock?

Market forces have brought Nvidia stock and many of its peers down as the Nasdaq and S&P 500 reach correction…

Read more »

A couple celebrating moving in to a new home
Investing Articles

Time for a Berkeley Group share price recovery as FY guidance is confirmed?

After slumping in 2024, investors will want to see better from the Berkeley Group Holdings share price. Here's what the…

Read more »