File photo: In this illustration, taken on August 22, 2022, the TikTok app logo can be seen.
Ruvik Dice | Reuters
Stock investing can be a complex endeavor that requires specialized guidance. Where can I get this advice?
Some people try to do their own research, poring over a host of financial indicators to identify potential winners, while others consult investment advisors and experts with years of market experience.
Someone else is watching Celestial motion or earth element to determine where to keep your cash.
Still others turn to social media, scrolling through their feeds looking for “financial influencers” or “financial influencers” to grow their money.
Let’s look at the final group of advisors—the “financial influencers”— Because its popularity, especially among young investors, has been growing And can replace traditional investment advisors.
track record
While the idea of investing based on someone’s advice on Tiktok may seem risky—perhaps not as risky as investing based on astrology—these “influencers” have already achieved a pretty solid track record in the first half of 2024.
The investment theme for the first half of 2024 is dominated by excessive focus on the technology sector, especially Stocks that are part of the artificial intelligence value chain.
Broker aggregation website BestBrokers analyzes the 20 most viewed stock picking videos on TikTok Starting in 2023, the recommendation’s share price could soar in 2024.
The team then tracked the prices of the recommended stocks from the date of the film’s release to June 21, 2024.
BestBrokers reported in July: “Our findings indicate that more than 64% of the 87 stock predictions in these videos were accurate, including notable rallies in artificial intelligence stocks such as Nvidia and Qualcomm.” About 36% The advice resulted in losses.
According to the report, most influential people recommend choosing stable blue-chip stocks such as Google, Nvidia and Amazon, and traditional currency experts also make such recommendations to people looking for lower-risk investments.
The biggest profit investors made from a single stock was Nvidia, which grew 63.08% during the survey period. A $1,000 investment in the stock would increase its value to $1,630.79.
On the other hand, invest $1,000 in the worst-performing stock (a New York-listed biotech company) Ginkgo Biofactory Holdings — will lose 74.74%.
What if people decided not to reduce risk by betting on a single stock, but instead diversified by buying all the stocks recommended in a single video?
If a person invested $1,000 in each stock recommended in a video and placed the largest bet, the gain would be $4,860.
However, “[it]required an initial investment of $23,000 in 23 different stocks, some profitable, some not so much.”
On the other hand, putting money into the most wrong bet of all the stocks recommended in the video would result in a loss of $1,517.
credibility issues
Given the track record above, is following the advice provided by financial influencers a reliable way to grow your wealth?
Experts interviewed by CNBC do not believe that “influencers” are the best choice for professional analysts and agents.
Gerald Wong, founder and CEO of Beansprout, a Singapore-based investment advisory platform, said it may be unfair to conclude that these “influencers” can be trusted just because many of their stock predictions are accurate in a short period of time. Huang also added that the U.S. stock market performed well overall during the study period.
Jeremy Tan, chief executive of asset and wealth manager Tiger Management, said the accuracy of their forecasts was “false”. “Furthermore, consistent results over a single period do not translate into clear conclusions about predictability over the long term.”
Zhang Jiang, head of equities at First Plus Asset Management, said since these influencers are largely unregulated and their credentials are unknown, their objectivity may be questionable.
Companies may pay them to promote the stocks, Zhang said, or they may be front-running — recommending stocks they own to others with the goal of driving up the stock price and then cashing out.
Tan said the motives of these “influencers” may conflict with the interests of those seeking advice on these platforms. “Advice or opinions found online may often be biased, unverified, and provided by individuals who are not professionally certified or regulated.”
He added: “Often, the public is not provided with sufficient information to discern the independence of such advice.”
investor education
While experts are wary of taking investment advice from “financial influencers,” they agree that social media content creators, especially on TikTok, do help spread the word about finance among young investors. Knowledge.
Beansprout’s Wong, who spent 13 years at Credit Suisse before launching his own investment advisory platform, said Gen Z investors have a “strong desire” to learn more through self-guided approaches rather than consulting a financial planner or advisor. Investment knowledge.
In a survey conducted by Beansprout, more than half of respondents said they were not confident in the investment decisions they made, indicating a lack of access to investment advice.
“We believe this reflects that access to expert investment insights has not kept pace with the proliferation of investment platforms and products in the market,” Huang said.
Emelia Tan, director of research and financial knowledge at Singapore Exchange, said influencers can bridge this gap by distilling research and content into bite-size pieces that are easy for retail investors to digest and understand.
First Plus’s Zhang said, “Compared with traditional financial news media that mainly report factual events, Financial Expert’s investment narrative provides the greatest value to retail investors because it helps viewers how to formulate investment opinions based on public information.”
He believes that “financial influencers” and professional advisors should not be viewed as mutually exclusive avenues of investment expertise.
Zhang said influencers can be a starting point for investors to gain basic knowledge about investing and wealth management, but given the superior investor protection provided by these institutions, they should seek professional financial advice from established and regulated financial institutions.
