Many people feel unsure when making financial decisions and use social media for help. This has led to the growth of digital influencers, better known as finfluencers, who share financial advice.
While following these recommendations may seem easy and convenient, it’s not always safe. So, let’s first understand what social media-influenced investing means and then know the risks that come with it.
Understanding Social Media Influenced Investing
It is the trend where people make their investment decisions depending on advice, information, and trends shared on social media. The growing influence of online communities and the easy accessibility of financial content have made this trend go viral.
For example, viral posts or trending hashtags often create a sense of urgency, pushing people to act fast without fully understanding the risks. Now that you have a clear idea of what social media-influenced investing is, let’s look at the risks involved.
Identifying Risks of Investment Advice on Social Media
These are some of the key dangers of trusting social media for your investment decisions:
| Risks Involved | Specifications |
| Limited Qualifications | Not all social media influencers possess enough qualifications or formal training related to investing or finance. This is one of the prevalent dangers of social media financial influencers. They may claim to be experts, but their advice may be based only on their personal opinions. |
| Too Much Inclination on Short-Term Goals | Many social media influencers discuss short-term gains and theoretical trading tactics. They don’t share details about long-term investment principles. It can be a red signal if you notice an increased focus on short-term gains. It can lead to considerable losses, especially if you are an inexperienced investor.To avoid such risks, differentiate between long-term investment plans and short-term guesses. This helps you stay safe from rushed and risky trading choices. |
| Limited Safety | Governing bodies regulate traditional financial advisors. On the other hand, finfluencers on social media work in an unregulated environment. The lack of oversight suggests investors must be cautious about fake schemes or wrong information. To avoid the dangers of social media financial influencers, investors must not take advice from finfluencers who don’t align with regulatory scrutiny. |
| Emotional Investing | If you follow finfluencers’ advice, you may be compelled to make unwary investment decisions. These decisions are controlled by emotion, and they are not logical. These emotional decisions can lead to considerable losses when the market declines. |
| Market Manipulation | Certain finfluencers possessing huge followings can manipulate markets. They do the same by circulating wrong information. This act can incur financial harm to you as an investor. Before obtaining financial advice, check that the particular finfluencer doesn’t indulge in market manipulation. |
How To Tackle Dangers?
Some smart ways to tackle the dangers of social media-influenced advice are:
1. Educate Yourself
Understanding the basics of investing is the first step to making smart financial choices. You may fall into common traps if you know how investments work. Always research and use trusted sources to learn about different strategies and options.
When you’re well-informed, you can avoid the risks of finfluencers and make decisions that truly fit your financial goals.
2. Use Non-Social Media Sources
It’s not always safe to trust social media for financial advice. Instead, use reliable sources like trusted websites, market research reports, or academic articles. These are reviewed carefully and offer more accurate and verified information compared to what you often see online.
3. Review Finfluencers’ Credentials
Before trusting any finfluencer, check their background and track record. Make sure their advice is clear, honest, and not full of big promises. Stay away from those who guarantee high returns or make bold claims. A reliable finfluencer shares helpful insights and has a history of smart decisions.
Always think about why they’re giving that advice, and don’t follow the crowd blindly. To avoid the dangers of social media and finance, do your checks and trust only credible sources.
4. Use reliable platforms for fact-checking
Many finfluencers operate without proper regulation, and social media is often unregulated for financial advice. Scammers take advantage of this to promote fake investment schemes. Always cross-check investment offers on trusted platforms like SEBI or FINRA.
Report any suspicious activity to protect others. Don’t rely only on influencer advice; research, verify facts from multiple sources, and ensure the information is accurate before investing.
5. Follow Reliable Finfluencers
It is recommended to consider investment strategies that prioritise long-term, stable growth. Such strategies are less risky. Follow only those financial educators who share valuable content instead of those who aim to build followers with fake promises.
Moreover, learning the investment basics (for example, asset allocation) can protect you from the danger of social media and finance.
Make Safe Investment Decisions Today
Finfluencers on social media may lure you with fake promises of financial success. The information, advice, and tips shared may not be reliable. Seek different viewpoints and use non-social media sources to ensure the accuracy of the information shared. Remember to approach social media platforms cautiously and authenticate information from reliable sources like the MadeForTrade community.
