If you want to know what your friends are up to, look at funny pictures of cats, or scope out deals at your favorite stores, social media is a great tool. More and more people are turning to social media for other things as well, such as help with making investment decisions. A look at the specifics of how people use social media to shape their investment plans can help you decide if such an approach is right for you.
Younger People Lead the Way
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The results of one survey published at marketwire.com revealed that the group most likely to use social media to make investment decisions is people under 40. The same survey found that this age group is three times more likely to believe that information received through social media is credible than other age groups. Overall, 40% of investors use social media as part of their financial game plan, and that number is likely to continue growing.
It isn’t just the young and the folks with limited assets who look to social media. Individuals with a high net worth are also seizing hold of the trend. As stated at hewinsfinancial.com, another survey found that “high net worth adults that are online are using social media for investing purposes at a rate that is higher than the general population!”
It becomes clear that investors want social media to impact their investment decisions. As financial advisory firms and other companies take note of this, they are more likely to use social media as a way to connect with clients.
How Businesses Use Social Media
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A report released earlier this year by the SEC states, “companies can use social media outlets like Facebook and Twitter to announce key information…so long has investors have been alerted about which social media will be used to disseminate such information.” This go-ahead opens the door for increased company-investor communication.
Financial advisors are taking full advantage of the opportunity presented by social media. A survey conducted by Accenture found that out of 400 financial advisors, 73% said that social media has led to an increase in client transactions and 77% said that it helps with client retention. Indeed, social media helps financial advisors communicate efficiently and easily with clients, and it makes the task of keeping up with industry news easier.
How Investors May Misuse Social Media
With the above being said, it’s obvious that the world of social media has a lot of sound information to offer to investors. When financially savvy individuals stick to official, reliable sources, they stand to benefit from their social media experience.
However, a note of caution is in order. If you follow the link to the Hewins Financial website included earlier in this article, the page it takes you to has an introduction all about how emotions can negatively impact your investments. One of your friends boasts on social media about an investment that paid off, and you decide to invest in the same stocks, just when those stocks are about to fall. Eventually you get locked into an unprofitable cycle of buying at high prices and selling at low prices.
In another scenario, the buzz on social media about a certain investment might make you doubt official sources of information. If all your friends on Facebook say one thing, but an official source says something to the contrary, which are you likely to believe?
Should Social Media Impact your Investment Plans?
When considering the pros & cons of annuities — resources for any type of investment, really — take the time for introspection. What are your specific long-term and short-term financial goals? Who do you trust to help you with those goals? Once you have a clear picture in mind, start searching for information.
For every source of information, ask yourself, “Is this advice coming from an expert, or did Great Aunt Helga just get over excited about her portfolio?” “Is this information up to date?” “What is this source’s motivation?” Tweets, blogs, and status updates from well-reputed experts and financial advisory firms are the best places to look.
If you’re new to the world of investing, don’t make any of your decisions based on what you see on social media. Educate yourself about the basics of investing, and don’t be afraid to meet face to face with a financial advisor. If you decide to trust that advisor, look for that person’s company’s social media sites.
As social media steps into more and more aspects of daily life, it becomes increasingly important to know the advantages and the potential pitfalls that can come from it. Keeping your emotions in check and your goals in front of you will help you make wise decisions.
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Buy and hold is the only good long term investing strategy. Social media has no real place for these types of investors when it comes to what they are doing. I say stay far away from it if you want better returns in the long run.
You have pretty much hit the nail on the head here. Social media is a great tool for most things, but it is often used inappropriately and that can damage your efforts. Anyone using social media needs to think carefully about what they are doing when using social media.