In the ever-evolving world of finance, the sources of investment advice seem to multiply, with one of the newer entrants being “finfluencers” – financial influencers who share stock tips and investment strategies on social media platforms like TikTok. But are these influencers a reliable source of financial guidance, especially for young investors looking to grow their wealth?
A recent analysis by brokerage aggregator site BestBrokers looked at the 20 most-watched stock-picking videos on TikTok from 2023 to track the accuracy of the recommendations given by these “finfluencers.” The results showed that over 64% of the stock predictions turned out to be accurate, with significant rallies in AI stocks like Nvidia and Qualcomm. However, about 36% of the recommendations resulted in losses, indicating a mixed track record for these influencers.
While some investors may have seen substantial gains by following the advice of “finfluencers” – such as a 63.08% return on Nvidia stock – others experienced significant losses, like the 74.74% drop in Ginkgo Bioworks Holdings. Diversification by investing in multiple recommended stocks can lead to both gains and losses, highlighting the importance of understanding the risks involved in following such advice.
Despite the apparent success of some stock predictions by “finfluencers,” financial experts remain skeptical about relying on social media influencers for investment advice. Professionals like Gerald Wong and Jeremy Tan caution against the accuracy and objectivity of these influencers, emphasizing the potential conflicts of interest and lack of regulation in the industry. They stress the importance of seeking advice from established and regulated financial institutions for better investor protection.
While “finfluencers” may not always provide reliable investment advice, they do play a role in spreading financial literacy, especially among younger investors. Social media content creators help educate individuals about investing and wealth management, filling a gap in expert investment insights for self-directed investors. However, the experts recommend supplementing this information with advice from certified financial professionals to ensure a well-rounded approach to managing investments.
While “finfluencers” may offer a unique and engaging way to learn about investing, their advice should be taken with caution. The mixed track record of stock predictions, potential conflicts of interest, and lack of regulation in the industry raise questions about the reliability of such advice. Young investors can benefit from the financial literacy spread by influencers but should seek professional guidance from established financial institutions for a more secure and informed investment strategy.