The technological world is starting to influence the investment sector and the industry needs to keep up to make sure investors are using their money safely.
Hargreaves Lansdown recently surveyed 2,000 Brits and found that 56% of 18–34-year-olds who invest get ideas from social media channels including TikTok, Reddit, Instagram, Facebook and LinkedIn.
In comparison, just 4% of the 55 – 64 age group said they received investment ideas from social media, with a third (33%) saying they were much more likely to use traditional newspapers instead.
Younger investors are still getting information from the websites of financial companies with 43% of 18–34-year-olds saying that is also where they get investment ideas from.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ”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. It appears that swiping up through posts to get ideas about investing has become a favourite pastime among many younger investors.
“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.”
Platform favourites
The survey also found Reddit is the most popular platform for investment ideas for younger investors, followed by TikTok.
Streeter said that the use of Reddit for investments “is particularly worrying given that it’s where the meme stock frenzy erupted this year, with speculators piling into heavily pumped shares like GameStop”.
She added: “For some new investors, trading has become a game and a form of entertainment, rather than a well-thought-out long-term investment strategy. Rather than taking advice from stars on TikTok or Instagram, new investors would be wise to access the realms of free research available from regulated investment platforms.
“So, it is welcome to see that despite the encroaching influence of social media, younger investors are still getting information from the websites of financial companies with 43% of 18–34-year-olds saying that is also where they get investment ideas from.
“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.’’
