This article is the latest installment of the Financial Times’ monetary schooling and inclusion campaign.
Should I borrow cash to buy Nvidia inventory? What could be the consequences of a fall in rates on the functionality of stock indices? And with all the effort that goes into stock trading, would sticking to a passive budget be a better option?
This is a small assortment of live investing threads on Reddit, which was named this week as the most popular online platform for finding investment ideas in a survey conducted by none other than Hargreaves Lansdown, the investment platform.
It turns out to be a clever concept to remind readers of the regulatory uproar surrounding Neil Woodford’s doomed United Kingdom equity income fund, which remains on Hargreaves’ list of “best buy” fund concepts until days before its listing is suspended. that getting your investment ideas from regulated resources is no guarantee of good fortune either.
We hear a lot of warnings about the relevance of investment “advice” given through unqualified and unregulated experts on social media platforms including Instagram and YouTube, but this is obviously for the general public who appreciate monetary content.
In 2021, when Hargreaves last conducted this survey, 43% of 18- to 34-year-olds surveyed said they learned their monetary wisdom on monetary corporate websites. Today, that figure has dropped to 29 percent, however, the number of Reddit users for investment concepts has increased. greater than 17 to 26 percent, while TikTok has greater than 12 to 20 percent.
However, the outsized influence that social media posts can have on investors worries the United Kingdom’s Financial Conduct Authority, which has introduced a high-profile campaign against its worst excesses. From suing prominent “influencers” who advertise unauthorized money trading schemes to highlighting the growing risks of scams on his InvestSmart website, his moves are laudable, even if what a national regulator can do with a global content generation device is obviously limited.
But it’s assuming that all investment content on social media is malicious or puts consumers at risk of monetary harm. As interest in classic corporate currency sites wanes, I would say there are many learning issues for corporations and regulators as they seek to regain some influence.
On the one hand, social media posts fill the void created by the lack of advice. In the United Kingdom, an estimated 39 million adults want money advice, but are unable or unwilling to pay for it. Financial literacy degrees in the United Kingdom are low; Most schools don’t teach young people anything useful about money, and they all have parents who are experts in monetary matters.
“Financial recommendation companies need other people with £1m in assets; They don’t need to start with £100 a month to invest. But that’s where I operate,” explains Damien Jordan, better known as Damien Talks Money to more than 200,000 people who follow his YouTube channel.
Learn more and the Money Literacy and Inclusion Campaign
Much of the 35-year-old’s good fortune lies in his ease of relating: He’s young, he’s dressed casually, and his accessible, jargon-free instructional videos make him seem like a wise older brother with whom you might talk cash during a football game. One word she hears from her followers is, “I didn’t think making an investment was for other people like me. “A well-rated Southerner in a suit might just throw out the same messages, but he would lack authenticity and connection to his audience.
The maximum burden of regulatory needs means that most advisors avoid the mass market, but Jordan also criticizes videos like The Wolf of Wall Street for glorifying trading and making it seem like making an investment is only for the rich. “There are many movies about index funds, that’s for sure, but if there were, following the life story of someone who invests £50 a week could earn you a million pounds. “
While the anonymity of social forums makes life less difficult for scammers, it also makes it less embarrassing to ask “stupid questions,” which are not embarrassing at all.
The interactive nature of social media is another main draw. The ability to comment on posts, ask and answer questions on online discussion forums like Reddit creates a network of investors who come to learn, but also to share their own knowledge. In stark contrast to the obstruction of regulated monetary providers in the United Kingdom, that “we can’t give the impression that we’re giving monetary recommendations, that’s why we don’t say anything”, I hope that steps will be taken to redraw the line between recommendation and guidance will facilitate this.
The questions I mentioned at the beginning come from the r/Investing subreddit. With about 3 million members (including myself), it’s smaller than Wall Street Bets, which exploded in the wake of the GameStop meme inventory phenomenon, but it allows green investors to consult the collective wisdom of their older, more experienced peers. .
While the anonymity of social forums makes life less difficult for scammers, it also makes it less embarrassing to ask “stupid questions,” which are not embarrassing at all. Yes, there are plenty of posts from other people expressing a preference for borrowing money and buying Nvidia stock, but there are also some wonderful answers to questions like “Do you know what a margin call is?”
I’m sure investor readers have learned a lot from their mistakes. Learning from other people’s mistakes and how they compare their inventory variety decisions also comes at a price. The editors of this forum express doubts and considerations about their own portfolios, the market in general, and the merits (or not) of quick inventories. Of course, there is a threat that the concepts on this forum will cause other people to lose money, however, there are high-profile warnings and the emphasis is on the difference between making an investment and gambling.
Another explanation for why I think Reddit performs so well among investors is its ability to self-regulate. Anyone who provides shrink codes for business sites is automatically and permanently banned, unlike Instagram, where spam comments on posts about finance and investing abound.
The final lesson I think the world of finance deserves to learn from social media content creators is their love of the visual medium. Social media is where other people go to look and receive information about all kinds of life skills for free, plus DIY, cooking, makeup, and now, money. Watching someone explain fundamental concepts about how to make an investment can resonate more strongly than written words, especially in a realm like finance, where formal communications are boring and jargon-filled. The duty to protect consumers has helped, but we still have a long way to go.
Jordan says his most popular videos are those with “hands-on, portable content,” such as tracking the clicks to create an online brokerage account with one pound. “Most Brits don’t know what an Isa inventory organization is,” he says. Investment subreddits tend to focus more on the United States, but they are also full of questions about tax-efficient investing methods, as well as how to keep investment fees to a minimum.
Of course, getting investing ideas on social media will never be without its challenges, but the popularity of this content and its ability to reach new audiences shows how much it can help solve the larger challenge of other people not investing enough or not investing enough. they commit. to your finances.
Claer Barrett is the editor of the FT and the FT’s Sort Your Financial Life Out newsletter series; claer. barrett@ft. com; Instagram and TikTok @ClaerB