Don’t listen to social media influencers’ advise for investing

Context: 

It all began with the pandemic, remote work, etc. So let me start from the top! People have been using the internet for all sorts of purposes, consuming content, doing business, communicating, creating content, the list goes on…

Unemployment & the internet

When the pandemic hit, it brought a wave of unemployment & layoffs along! So many people were left without a job overnight and absolutely nothing to do with their day, so they resorted to what they thought was the easiest: stock trading!  To trade stocks, you must be well researched and do it in the sanest way possible, right! But what if you consume all your information on social media like Reddit, Twitter, etc.?

The glut of financial info

With that said, people also started consuming a ton of blogs on investing, personal finance, etc rather than actionable books like The Intelligent Investor (Benjamin Graham), The Psychology of Money (Morgan Housel), we were drifting away from slow and steady means of making money to the savvy & quick! On the same hand, some creators started creating videos on finance, stocks, trading, etc. as a side gig/passion and attracted the attention of all those quick money chasers.

Gen-Z & their ways

The modern generation or as we call it “Gen-Z” devise their ways of doing things and they more often than not deviate from the tried and tested methods. The ones who have never traded stocks ever before use Robinhood and copy the trades of financial influencers, who treat trading stocks as a game. 

Nothing remains funny when you start losing money. This is what largely happens when you follow the stock calls of someone on YouTube/Reddit. There’s a saying in markets: Do Your Research. This bit should not be outsourced to anyone and the new wave of retail investors are outsourcing this completely to naive content creators and making investments that show red more often than green.

GameStop acceleration

The GameStop saga back in 2021 began showing all of us that investing & trading are increasingly becoming social. People follow and consume subreddits, Twitter threads, tik-toks to decide what to buy/sell rather than the boring wall street analysis, their observation. 

The influencer telling you which stocks to buy is likely looking to exit those, it might be just to make his/her losses good on your cost, who knows?

Due diligence is non-negotiable

Understanding a company and doing analysis should be independent if you want to make money, anywhere. Until and unless our thought process is not independent, we can’t make decisions for ourselves and consequently rely on Reddit, Twitter, or TikTok to put our money to work.

To sum

Influencers might also be ill-informed about a lot of aspects of the market, they might not have skin in the game and are just endorsing a stock because they’re being paid for it, anything could be possible. At the end of the day, you can’t outsource your thought process/wealth creation to someone with 1 Million subscribers on YouTube.

With that said, things are going to get incredibly crazy with crypto as it has a great following among millennial & Gen-Z folks and is relatively more internet native than ever stocks have been! So, it’s better to keep our analysis independent of every suggestion, stock call on the internet, you won’t know the intention and sit at a loss.

How has been your experience of investing in stocks/crypto? 

Manvinder

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