One in three retail investors have changed their portfolios over the past 12 months because of announcements made via social media, according to a new study. Some 9% claim to have made at least five investment changes because of this, and 2% have made more than 10.
The overwhelming majority at 66% have not used social media to influence their investment portfolios. Yet it’s difficult to ignore that this report – by Willis Owen – spells out the sheer power and influence of social media, which arguably has never been more prevalent.
There’s an interesting split of the reliance on websites such as Facebook and Twitter for financial news and views. More male investors turn to social media for investment updates. Some 43% of men have made at least one social-media-influenced change to their investment portfolios over the past 12 months compared to just 21% of female investors.
And when it comes to age, younger investors, who tend to spend more time on social media, are more influenced by it when managing their investments, than older investors. Some 45% of investors aged 35 to 44 have made one or more social-media-influenced change to their portfolios over the past 12 months, compared to just 15% of those aged 65 and over.
Dangers of social media
Experts are, understandably, concerned that relying on social media to learn of market movements and for investment analysis is not a robust strategy.
Adrian Lowcock, head of personal investing at Willis Owen, said: ‘There is no doubt social media has joined traditional financial news media as a key source of information for investors. In the past, successful investment decision-making was based on information gathered through traditional media, professional advice and thorough research, but social media offers an immediacy which can impact markets in the short term and influence investors. However, they need to pay careful attention to sources, as there is a greater risk of being taken in through ‘fake’ news, than with some more traditional media sources.’
Social media is even having a significant impact on institutional investors. A separate survey by Greenwich Associates reveals almost 80% of institutional investors use social media as part of their regular workflow. Approximately 30% of these investors say information obtained through social media has directly influenced an investment recommendation or decision.
Dan Connell, head of market structure and technology at Greenwich Associates and author of the study said he’s projecting a ‘further, rapid increase of social media influence in institutional investment markets.’
It wouldn’t be an uneducated guess to expect that retail investors will follow suit. It would seem prudent, though, to check anything on social media with established, trusted news sources. Savers should remember that their platform might have a host of information including analysis and news. Better to be safe than sorry, as they say.
Be on your guard
Investment scams are already rife on social media. The newest see schemes advertised via the Instagram app. Those targeted are encouraged to transfer £600 and are promised almost instantaneous profits. Once the money is paid, they are sent images supposedly of profits building up in their accounts.
The fraudsters tell their victims to ‘invest’ more, and that the money can be released for a fee, which is why losses can build to thousands of pounds. However, they then close the Instagram account, stop all contact, and disappear with the money.
Some 356 reports of losses worth more than £3m have been made in the past five months, according to Action Fraud. It’s crucial, in all cases, to only deal with financial firms authorised by the regulator — the Financial Conduct Authority (FCA) and not to hand over any money until you’ve made sure the company and investment opportunity is genuine.