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- There has been an increase of financial education and advice content on social media apps, enticing young investors.
- Recent research shows that young investors are following riskier, more short-term strategies to make profits.
- 'Finfluencers' and money experts alike urge have urged young investors to be cautious.
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The rise of 'finfluencers' and huge surge in financial content on platforms like TikTok, Instagram and Twitter over the past 18 months has hooked a new generation on finance and investing.
Young investors are spending their spare cash on cryptocurrencies and stocks - with a large number of them following the advice they got from scrolling through social media, lured in by promises to get rich quick and beat the system.
Videos tagged #finance, #investing or #stocktok on TikTok have billions of views - a total of 7.5 billion at time of writing. Clips hyping stocks that are "going to the moon", promising consumers they can easily turn $10 into $10,000 or kickstart a "doge revolution" dominate the financial social media scene and drown out educational content.
"The FOMO culture that dominates social platforms like TikTok, Reddit and Instagram has become a breeding ground for the marketing of high-risk investments shunned by the mainstream investment industry - often for good reason." Myron Jobson, personal finance campaigner at Interactive Investor, told Insider.
Recent surveys have shown young investors are pursuing riskier strategies than older generations. Last month, Barclays research showed 21% of Gen Z investors are investing to take advantage of current market conditions and 16% are trying to "play the markets".
Interactive Investor published a survey earlier this month showing more than half of young investors who have purchased bitcoin or dogecoin have done so using debt from credit cards, student loans and other types of loans.
A Motley Fool study conducted earlier this year showed that amongst Gen Zers particularly, social media plays a key role in how they make their financial decisions.
Not all financial social media content can however be labeled the same. With the same hashtags that promote questionable investment and financial advice, there are videos with sound advice explaining Roth IRAs, how to increase your credit score or the benefits of long-term investing.
Tori Dunlap, a money expert who started her first business at age nine and accumulated $100,000 worth of savings by age 25, is one of the 'finfluencers' who shares such content as part of her brand Her First $100K on TikTok.
She said even before TikTok, bad financial advice was everywhere - it was just delivered through a different medium. Her main issue with the app is the 60-second time limit on videos. This feature was recently removed, but longer videos are still rare.
"I have a lot of parameters because I only have a minute and so I am using TikTok hopefully for folks as a jumping off point of like 'I'm giving you this bit of education, now go read about it,'" she said in a recent interview with Insider.
Dunlap believes problems arise when consumers stop questioning the content they are taking in - after receiving good advice once, it's easy to keep trusting what you see online, she said.
"You have to go 'does this seem too good to be true?' and if it seems too good to be true, it probably is. Or, just google the person." she said.
Jobson agrees - he recognizes some content is helpful, but warns consumers to approach online investment advice with caution and to check the credibility of those who are giving it.
"There are some good materials out there to help people on their investment journey, but, more generally, we have seen concerning social media posts." he said. "The advent of broader online 'influencers' has seen rise of so-called 'financial influencers' - many of whom haven't got a clue on what they are talking about to put it bluntly."
from Business Insider https://ift.tt/3xUwosQ
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