Investing in equities can be a challenging endeavor, requiring specialized knowledge and guidance. With the rise of social media platforms, particularly TikTok, a new source of investment advice has emerged – finfluencers. These self-proclaimed financial influencers have gained popularity among young investors, who are increasingly turning to them for tips on how to grow their wealth.
In a study conducted by BestBrokers, the performance of stock recommendations made by finfluencers on TikTok in 2023 was analyzed. The research found that over 64% of the stock predictions were accurate, with notable rallies in AI stocks such as Nvidia and Qualcomm. However, it is important to note that approximately 36% of the recommendations resulted in losses.
While investing in individual stocks based on finfluencer recommendations can yield lucrative returns, it also carries a significant level of risk. For instance, an investment in Nvidia could have yielded a substantial profit, whereas investing in Ginkgo Bioworks Holdings would have resulted in a considerable loss. Diversifying by investing in multiple stocks recommended in a single video could potentially mitigate risk, but it also requires a larger initial investment.
Despite the apparent success of some finfluencers in predicting stock movements, financial experts remain skeptical of their reliability. Gerald Wong of Beansprout cautioned against placing too much trust in finfluencers, emphasizing that short-term success does not guarantee long-term predictability in the stock market. Jeremy Tan of Tiger Fund Management highlighted concerns regarding the objectivity of finfluencers, suggesting that they may have ulterior motives that conflict with the interests of their followers.
While finfluencers may help increase financial literacy among young investors, experts recommend seeking professional financial advice from regulated institutions for sound investment decisions. Jiang Zhang of First Plus Asset Management pointed out that finfluencers may lack the necessary qualifications and could have hidden agendas when making stock recommendations. Emelia Tan of the Singapore Exchange emphasized the role of influencers in simplifying complex financial concepts for retail investors, but underlined the importance of seeking guidance from established financial institutions for investor protection.
While finfluencers play a role in democratizing investment advice and spreading financial knowledge, investors should exercise caution when relying solely on their recommendations. Seeking guidance from qualified professionals and conducting thorough research remain crucial components of making informed investment decisions in the ever-changing financial landscape.