Social media’s influence on society shouldn’t be underestimated. Internet trends are far-reaching and constantly changing, and the world of finance and investing is no exception to their effects. Nowadays, you can find information about investing on platforms like Reddit, Robinhood, YouTube, and even TikTok and Facebook.

These novel ways to learn about the stock market and how to manage your personal finances have blurred the lines between making beneficial investment decisions and following social media trends. 

A great example of this is the explosion of so-called “meme stocks”一stocks that have a significant increase in value after becoming viral on social media. Just take a look at the cryptocurrency Dogecoin. It was created as a ‘joke’ back in 2013, but it saw massive spikes in 2021 after being mentioned in tweets from Elon Musk and Snoop Dogg.

With this in mind, let’s take a look at a few ways that social media can impact the world of investing.

2 Ways Social Media Can Influence Your Investment Strategy

Increases the Appeal of Following the Pack

If you’re an investor with limited knowledge in the field or a young person that’s just making their first steps in the stock market, it’s easy to blindly follow the advice of influencers on social media without doing much research beforehand. This act is called “herding”, which means that an investor follows the crowd out of fear of missing out instead of basing decisions off of their own analysis. 

A great way to prevent yourself from being sucked into this phenomenon is by creating a specific set of steps you follow before investing. For example: check stock performance data from the past few years, read more about the limits and possibilities of the company or cryptocurrency you’re investing in, consult with a financial advisor, etc. 

By doing so, you will ensure you’re only putting your hard-earned money into ventures that have the potential to succeed long-term.

Creates an Unnecessary Sense of Urgency

Social media platforms like Instagram, Reddit, and Twitter can turn a certain stock or cryptocurrency into a trending topic in a matter of hours. The cryptocurrency boom is a great recent example of this, as many cryptos began trending like wildfire and everyone started investing without doing much research of their own.

Nowadays, this tends to happen very often, as people get FOMO (fear of missing out) and invest in a popular stock or cryptocurrency just to get in on the meme or because they think they have an opportunity to ‘get rich’.

It can be hard to resist the temptation of taking the plunge right as everyone else is doing it, but it’s necessary. Before investing, it’s a good idea to take a step back from social media to do your own research, talk to a professional, and make sure the energy of the crowd isn’t influencing your decisions.

Final Words

Social media affects so many areas of our lives; what we buy, what TV shows we watch, what music we listen to, and even what we invest our money in. With that being said, it’s good to be wary of the advice you read on social media platforms regarding trending investment opportunities. Social media can be a great place to learn and talk about investments, but it’s crucial to do your own research before putting your money at stake.