More than half of young investors are being influenced by social media – a trend that shows little sign of abating, according to the latest survey from financial services company Hargreaves Lansdown.
Market research company Opinium conducted the survey of 2,000 people for Hargreaves Lansdown.
The research revealed that 56% of 18-34-year-olds who invest get ideas from social media channels, namely, TikTok, Reddit, Instagram, Facebook, and LinkedIn. Reddit was reported as the most popular platform, with TikTok (12%) as the second.
In comparison, just 4% of 55-64-year-olds turn to such platforms, with 33% saying they were much more likely to use traditional newspapers instead.
These insights are strikingly similar to a report published by Finder earlier this month, which FinTech Global reported on here.
According to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, the collision between social media and financial markets has been one of the most dramatic trends emerging from the pandemic, and it shows little sign of easing.
Streeter expressed some concern for the trend, however, “In many ways it is encouraging that social media is prompting a more diverse range of investors to dip their toe in the financial markets for the first time. However, what is concerning is that it’s often on posts or in chat rooms on social media where speculation surrounding hot stocks runs rife.”
For example, Streeter continued, the Reddit forum was where the meme stock frenzy erupted this year, with speculators piling into heavily pumped shares like GameStop.
“For some new investors, trading has become a game and a form of entertainment, rather than a well thought-out long-term investment strategy. The risk is that they could get their fingers seriously burnt by following the herd into highly risky purchases, which could scare them off investing in the future.”
All is not lost however, Streeter said the research revealed that 43% of younger investors (18-34-year-olds) are still saying they are getting their investing information from the websites of financial companies.
Issuing advice to potential new investors, Streeter added that they “would be wise to access the realms of free research available from regulated investment platforms.”
“It’s vital that investors do as much homework as they can before taking the plunge into any investment, only buy from regulated sources… and look for a long term return rather than trying to win a speculative short-term bet on a hot stock.”
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