The Hype of Investing: Referral Business, Not Returns

The Hype of Investing: Referral Business, Not Returns

Investing is not a pyramid scheme. But the surrounding noise, that constant "invest, invest, invest" mantra, has an owner. And that owner earns money for every naive user who opens an account, not from your portfolio's performance. The message sold — that €10 a month and compound interest will make you a millionaire — is a theoretical calculation assuming perpetual bull markets, zero fees, zero inflation, and zero taxes. In reality, that plan barely covers a couple of decent dinners a year. At best.

The most common experience shared in these discussions is someone putting €3,000 into a product yielding 4.5% and getting €45 net after a year. Gross, obviously. After deducting fees, real supermarket inflation, and tax on savings, the result is negative real yield: you paid for storing your money. The uncomfortable conclusion is clear: you didn't invest; you free-funded a platform that needs customer volume to be profitable or to inflate its valuation for a sale.

Why now and not twenty years ago

The cycle repeats. When money is cheap and the economy overheats, everyone becomes a guru. This peine with housing between 2005 and 2007. Now it happens with so-called "democratized investing." The incentives are the same: platforms need accounts, and content creators live off referrals and sponsorships from those very platforms. Their business isn't your profit; it's your entry.

There is a more cynical reading circulating that deserves scrutiny: that money printed in 2019 to bail out the usual suspects ended up in markets, and someone must act as the counterparty so early entrants can sell and take profits. According to this thesis, the counterparty would be the late-arriving small saver. It is a hypothesis, not data, but it explains why the message has become so insistent.

The comparison that dismantles the narrative: paying off a mortgage

The most devastating calculation doesn't come from an S&P 500 chart. It comes from the mortgage. Those same €3,000 that yield €40 net annually, if used to pay down principal, reduce payments by around €10 a month. In four months, you match what the financial product took twelve months to achieve. Plus, you have more breathing room if things go wrong. The lingering question is simple: why does no one make videos about this?

Because there is no commission. That is the problem. Paying off debt generates no referrals, doesn't inflate valuations, and doesn't pay for sponsorships. Real investing in stocks or ETFs requires significant capital, a horizon of twenty years or more, and iron discipline not to sell during downturns. None of that sells in a motivational video. What sells is the idea that effort and patience are for fools.

Same dog, different collar

The most repeated comparison is with gambling. Previously, the slogan was "play and win" with lottery or online casinos. As gambling advertising was banned, the sector reinvented itself. Now the message is "invest and build your future" with crypto, thematic funds, and trading courses. The mechanism is identical: appeal to greed, promise financial freedom, and present quick wealth as one click away.

The other trick is cherry-picking data. They show the S&P 500 chart for the last ten years, a straight line to the sky except for two or three dips painted as buying opportunities. What they don't show is the chart from 2000 to 2010, flat or negative, nor Japan's since 1990. Extrapolating recent past to infinity is the oldest scam in the book.

So what should someone with savings do?

Here consensus breaks. Some argue that not investing means losing money anyway, because inflation is the perfect tax: silent, universal, and beneficial to the biggest debtor of all, the State. Others respond that this is a false dichotomy: they present two paths — being a fool with idle cash or being smart and investing — hiding that both can lead to loss, just differently. One loses through inaction; the other, through action.

Real estate appears as an emotional refuge, though it isn't free either: tenants, community fees, property tax (IBI), special assessments, renovations, and zero liquidity. Buying to rent today is different from buying thirty years ago for pennies. For the average saver who doesn't want to be a landlord or watch charts, the least bad option mentioned is a global accumulation index fund with low fees. The lesser evil, not the panacea. And only with money you don't need.

The prediction, with all reservations: while money remains cheap and platforms need to acquire accounts to justify their valuations, the noise won't die down. It will drop when the market corrects and referrals stop paying. Then gurus will discover something else to sell.