The digital world is where people of all ages spend lots of their free time. Whether it’s browsing Facebook for neighbourhood gossip, getting dinner recipes from Instagram or TikTok, or finding something to argue about on Twitter, we’re all guilty of spending a bit too long online.
This has led to an increase in social media investment advisers (finfluencers), and research has shown that 43% of young people take investment advice from Reddit, the forum-style social media platform.
So, the big question is, can social media be trusted for investment advice? Let’s find out.
Where do people get investment advice?
Research by This is Money has examined the investing habits of people of various age groups.
Their findings are fascinating and show us that:
- Over 55s mostly use traditional financial websites for investment advice.
- They also favour newspapers, but a little less than in previous years.
- Very few 18-34-year-olds use traditional resources and instead choose social media.
- The 35-54 age range is moving towards Reddit, with TikTok also rising in popularity.
- Almost a quarter of people under 35 use social media for investment advice.
Artificial intelligence is also becoming increasingly popular for this kind of guidance, although it isn’t as widespread as the traditional tools or social media.
Can you trust social media for investment advice?
While finfluencers are becoming more prominent, their advice can be dangerous. For example, they often advocate for “hot stocks” that are actually very risky investments, presumably because they attract more clicks. It’s also exciting to hear promises about huge returns in short timeframes, especially if you think they’re a reliable source of information.
Another issue is that people tend to judge a finfluencers reliability on how many followers they have. This is problematic because followers can be bought and many of these accounts may be bots or dormant. Finfluencers may also simply be very entertaining to watch which leads to loads of followers but doesn’t mean their advice is to be trusted.
How to choose a financial adviser
Google is your friend when it comes to choosing an adviser and helps you sort through the time wasters and fraudsters. With the traditional route, you can check how well-rated an adviser or company is on various platforms, from Trustpilot to Google Reviews, which can give you an idea of how helpful their advice will be.
You can do the same for finfluencers, too, and a bit of digging can help you establish whether or not they’re to be trusted with your investment strategy.
The importance of doing your own research
It’s incredibly important to do your due diligence before taking financial advice from a social media star. With so much cybercrime, misinformation, and fraud online, it’s risky to seek advice from a finfluencer, and it’s always more prudent to speak to a professional financial adviser.
So, if some larger-than-life character on the internet is offering huge returns or quick wins with investments, consider this a red flag. You should also take Reddit advice with a pinch of salt as even though many posters talk with confidence and act professional, you don’t have a clue who they really are.
Conclusion
All in all, while promises of big wins can be enticing, investing is all about the long game. A balanced, strategic, well-researched approach will always outperform promises of quick, big wins, especially if you have a trusted adviser guiding you through your decisions.
For advice managing your investment portfolio, contact the experts at Cedar House Financial. Call us on 020 8366 4400 or email enquiries@cedarhfs.co.uk to get started