More than half of 18-34 year-olds who invest find their ideas on social media, according to a new study.
A survey of 2,000 people found that Reddit is the most popular source of investment news for young people, followed by TikTok in second place, according to a September study by Hargreaves Lansdown.
Other popular social media platforms such as Instagram, Facebook and LinkedIn have also been a source of inspiration for investments by people under 34.
In comparison, only 4% of investors aged 55 to 64 use social media to get information about investments, with a third saying they prefer traditional sources such as newspapers.
However, research has also shown that 43% of young investors still use financial company websites to inform their decisions, possibly including proactive investors.
Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown, said: âThe collision between social media and financial markets has been one of the most dramatic trends emerging from the pandemic and it shows few signs of mitigation. ”
Young investors should be wary of relying only on social media for information, she added, as this is a place where “speculation around hot stocks is rife.”
Streeter said it was “particularly worrying” that Reddit was so popular, as it was a big part of the memes stock frenzy that has erupted this year around GameStop and AMC Entertainment, where the sub-reddit forum of WallStreetBets triggered massive investments in the company and ushered in a new era of “YOLO trading”.
âFor some new investors, trading has become a game and a form of entertainment, rather than a well thought-out long-term investment strategy. The risk is that they will burn their fingers following the herd in very risky purchases, which could scare them away from investing in the future. “
However, she was reassured that traditional research is also still used to inform decisions and recommended that “investors do as much homework as possible before embarking on an investment.”