Nearly three-quarters of Gen Z investors depend on social media platforms and financial influencers for investment guidance.
A significant number of Generation Z investors are turning to social media and financial influencers for advice on investment decisions, according to data. This trend is more prevalent among Gen Z than other generations, with 70% of the age group considering themselves active investors.
Research from Charles Schwab indicates that 60% of millennials also use social media for investment information, while only 36% of Gen X and a mere 11% of baby boomers and the silent generation do so.
One of the reasons for this trend is the accessibility and relatability of financial advice provided by finfluencers compared to traditional sources like certified financial advisers or mainstream financial publications. However, there are concerns about the reliability of this information.
Online communities and social media have become increasingly important in the investment process, especially for younger investors. LinkedIn, Instagram, TikTok, and Reddit are popular platforms for investment tips. Additionally, conversations with other retail investors on online forums also play a significant role in decision-making.
More than half of Gen Z investors read online blogs when deciding where to invest. Despite the growing trend of relying on social media and finfluencers, Gen Z still recognizes the benefits of seeking professional advice from financial advisers and fund managers, with 67% of the demographic considering it the most important source of information.
Financial influencers, while popular, are not without risks. There is a documented risk of fraud associated with their advice, particularly when promoting dubious investment products or unlicensed trading platforms, particularly in the crypto market. The lack of regulatory oversight and the spread of misinformation are also concerns.
In light of these risks, it is important for investors, particularly young ones, to exercise caution when evaluating finfluencer content and to prioritize guidance from certified professionals for sound financial decision-making.
According to Richard Flynn, managing director at Charles Schwab UK, the growing number of sources providing investment information makes it increasingly important for young investors to know what they can and cannot trust. He emphasized that the increase in online communities and finfluencers in the investment process is a trend that is only increasing.
For investors seeking to protect their portfolios from market volatility, a diversified portfolio, balanced across asset classes and sectors, is a sensible, time-tested approach, Flynn added.
While the use of finfluencers and social media as sources of financial information has increased over the past year, it remains to be seen whether this trend will continue in the future and how it will impact the investment landscape.
- Gen Z investors are frequently seeking advice on investment decisions from financial influencers and social media platforms, as indicated by data.
- Conversations with other retail investors on online forums and reading online blogs are significant factors in decision-making for Gen Z investors.
- Despite the popularity of financial influencers, their advice carries risks, such as fraud, lack of regulatory oversight, and the spread of misinformation.
- In the opinion of Richard Flynn, the growing number of sources providing investment information makes it essential for young investors to discern reliable information from unreliable sources.
- Maintaining a diversified portfolio, balanced across asset classes and sectors, is a wise strategy for protecting portfolios from market volatility, according to Richard Flynn.
