The world of investing can be daunting for many people, leading them to seek advice from various sources to navigate the complexities of the market. Some turn to traditional investment advisors, while others rely on their own research or even astrological signs to make investment decisions. However, in recent years, a new breed of advisors has emerged — “finfluencers” or financial influencers who share investment advice on social media platforms like TikTok. These finfluencers have gained popularity, especially among young investors, who see them as a more relatable source of investment information.
A recent study conducted by brokerage aggregator site BestBrokers analyzed the investment advice shared in the 20 most-watched stock-picking videos on TikTok from 2023. The study found that over 64% of the stock predictions made by finfluencers in these videos turned out to be accurate, leading to substantial gains for investors who followed their advice. For example, an investment in Nvidia based on a finfluencer’s recommendation would have grown by 63.08% over the specified period. On the other hand, investing in the worst-performing stock, Ginkgo Bioworks Holdings, would have resulted in a 74.74% loss.
While the track record of finfluencers in the short term may seem impressive, experts caution against relying solely on their advice for investment decisions. Gerald Wong, CEO of Singapore investment advisory platform Beansprout, points out that the accuracy of finfluencers’ predictions may be misleading, especially given the overall positive performance of the stock market during the study period. Jeremy Tan, CEO of Tiger Fund Management, emphasizes that a single period of success does not guarantee long-term predictability.
Challenges with Finfluencer Advice
One of the main concerns surrounding finfluencers is their lack of regulation and potential conflicts of interest. Jiang Zhang, head of equities at First Plus Asset Management, highlights the questionable objectivity of finfluencers, who may be incentivized to promote certain stocks for personal gain. Additionally, the lack of professional certification and regulation among finfluencers raises questions about the reliability of their advice.
Despite the skepticism surrounding finfluencers, experts acknowledge that they play a role in spreading financial literacy, particularly among younger investors. Emelia Tan, director of research and financial literacy at the Singapore Exchange, believes that finfluencers can provide a starting point for investors to learn about investing and wealth management in a more accessible way. However, she also emphasizes the importance of seeking professional financial advice from established institutions for a more comprehensive and reliable investment strategy.
While finfluencers can serve as a valuable resource for novice investors looking to learn about the stock market, it is essential to approach their advice with caution. The impressive returns seen in the short term may not be a reliable indicator of long-term success, and the lack of regulation and potential conflicts of interest in the finfluencer space raise red flags about the credibility of their recommendations. As such, investors should use finfluencer advice as a supplementary tool for education and seek guidance from reputable financial institutions for sound investment decisions.
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