Just like everyone else, social media has become an integral part of my life. I rely on it not just for communications, but also to gather information.
The influence of social media should not be overlooked since popular influencers/ key opinion leaders (KOLs) and investment forums can have a significant impact on investor sentiment and decision making. Earlier this year, certain overseas stocks experienced huge volatility, fuelled by social media hype and online discussions. Referred to as MEME stocks, these stocks are heavily discussed on the forums, and exhibit a high level of risk or volatility.
Investing is not about following the crowd
People follow and like what interests them on social media, and I’m the same way too with people and posts that I support. However, investors should not make decisions solely based on the comments and recommendations of others, especially on a social media. The number of followers, likes or comments cannot help us make informed investment decisions.
A trending topic on social media may form a collective sentiment which in turn can have an influence on our behaviours and decisions. While we should remain clear-headed, it is always important to assess an investment product’s features, risks and returns, and consider if it is suited to our own investment needs and risk tolerance. For example, online investment forums may recommend investors to seek returns from short term volatility or even through day trading, but these strategies may not be suitable for the average retail investor.
Investors should make decisions based on their own insights. While investment advice on social media can be taken as reference, investors should always think twice and analyse before investing.
