Social Media's Impact on Your Investments | Motilal Oswal

Social Media on Your Investments

Social media holds its own in terms of the news and views it promotes. In fact, in today’s world, social media has its own pride of place, side by side with any financial news resource worth its salt. Thus, this implies, very clearly, that individual and institutional investors are relying more and more on social media sources to make investment decisions. 

A recent, and enlightening, study from Greenwich Associates (a division of CRISIL) reveals that nearly 80% of institutional investors make use of social media for their normal work flow. Furthermore, 30% of such investors state that information and data obtained from social media has had a direct influence on investment decisions and recommendations. The stock market today is an online arena of exchanges and social media thrives online. Is it surprising, then, that social media plays a key role in investment decisions and choices? 

The Research Says it All

Almost all communication these days, in all spheres of life, is done via social media. At least one social media account or channel is used by any single individual. Social media is a domain through which humans live and breathe today, prompting you to do everything from adopting a child to investing in an upcoming IPO. In studies, almost half of all investors questioned responded that information from sources of social media like Facebook, etc, prompted them to conduct additional research on a specific industry. This led to an investment decision in some cases. Hence, the minute you open a Demat account to invest in any securities, you can be sure that social media will touch your life at some point. 

Results of studies clearly show how social media influences financial decisions that may result in the allocation of billions in wealth all over the world. Institutions, globally, expect to increase their use of social media by almost 40% in the times to come. Therefore, there will be a rapid surge of the impact of social media in institutional and individual investment markets. 

At the individual level, the social media floodgates have already opened up considerably with popular investment “gurus” like Peter Lynch taking to YouTube to give you investment strategies to use on the stock market today. With taglines like “it pays to be informed” and the like, the Google-owned platform that generates a massive amount of videos on a daily basis has 75% of the market share that relates to the online video industry. Today, the best “all-round” investment channel on YouTube is called (quite aptly) “MyWallSt”. With viewership in the thousands, if not millions, you can see where all this is going. 

Influence and Influencers

The reasons for the use of social media are obvious. Social media presents a quick and easy way to communicate ideas, thoughts, and all other manner of things. Furthermore, through apps on your smartphone, you are in literal touch with the rest of the world. While you are on a plane or at a movie, or even tucked up in bed, you are able to make investment decisions at the click or touch of a button or screen, respectively. Social media makes life convenient. Besides this fact, with social media, there comes the social media influencer, a person who is relied upon for opinions and advice in various areas of interest. If you want to buy the best nail varnish today, you will find an “influencer” that helps you. If you want to invest in the best mid-cap stocks in the share market today, there will be a dozen or more “influencers” to lead you through the process. 

What Has Influence Where

The professional world of investment belongs to a social media platform that has a committed user base. LinkedIn is the source of professional usage that is preferred by 52% of institutional investors, with 85% of those using the platform on a weekly basis. With individual investors, especially with those who prefer online trading, YouTube and Facebook are very popular for learning about all things related to investment instruments and asset allocation. The next highly used platform for seeking opinions and advice is Twitter, with an emphasis on use for commentary on events in the market. 

If you look at the scenario of investing, you will find out that timing is what it is built on. The next important aspect is data and information. Social media facilitates the speedy flow of knowledge, and since the world at large, right from populations in small towns to large metros have access to this flow, there’s bound to be a reliance on social media. Furthermore, several brokerage companies have been providing customers with tools that aggregate and analyse information from sources of social media to help people invest. 

Social Media - The Main Media

There is no doubt that social media is here to stay, and only grow its own influence over time. As if you didn’t depend enough on it now, with all the “likes” being the most important indicators of any person’s or organisations’s worth, trends in social media are created everyday. Recent ones include Meme Investing, Reddit groups competing with biggies on Wall Street and the mania that revolves around cryptocurrency. However, with all the good that social media does, because it is so diverse in nature, it also includes entities that could manipulate platforms for their own selfish purposes. The stock market today is already a popular place, and social media is just fuelling that popularity, as it does with other instruments of investment. 

Be an Intelligent Investor

As an investor, you must make sure to make your own decisions, based on your own knowledge that may be derived from a number of sources, not just social media. The power of social media is almost hypnotic, but one wrong move could lead you up a roller-coaster ride of bad investment decisions. When you open a Demat account, you may want to invest in stocks or other equity - based securities. Instead of modelling the strategies or advice you are getting via social media, you should rely on your own research for sound investment in the end. 

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