Retail investors are increasingly shunning social media for their financial advice despite its rise in prominence during the meme stock frenzy of 2021.
A total of 42 per cent of investors said they were using social media “significantly less” than they used to for investing, even as fears about young investors taking financial advice from ‘finfluencers‘ has begun to spread.
This has left social media now ranking as one of the least trusted sources of information and news to inform retail investment, according to data from the financial information platform Finimize.
Retail investor use of social media came to the forefront of the financial world during the ‘meme stock’ saga in 2021 when stocks such as Gamestop surged in value not because of intrinsic value but due to social media’s influence and online communities’ influence.
This week, trading platform Robinhood, which was at the centre of the storm of popularity, launched in the UK.
Despite a reluctance to rely on social media for financial advice, retail investors are still eager for information, with 65 per cent saying they were more interested in financial advice than ever before.
The research found that investors now ranked independent trade and financial media as the most trustworthy.
The news comes as social media platform Reddit is hoping to involve its own users in its initial public offering, setting aside 1.76m shares for users and moderators.
Carl Hazeley, chief analyst at Finimize, said: “Given Reddit shot to prominence higher during the 2021 meme stock frenzy, the company’s IPO and performance thereafter might be seen as a litmus test of retail investors’ engagement with the platform.
“However, our data shows retail investors themselves are shunning social media for informing their investment strategies. It is one of the least trusted sources of information for them, and they are using it significantly less, whilst seeking financial education and guidance more than ever – which could have implications on the investment case for the social media giant.”
Meanwhile, Finimize’s survey also found that retail investors remained cautious about trending areas such as artificial intelligence and cryptocurrency: 48 per cent said there was an AI bubble, while 31 per cent said we were in a crypto bubble.
Investors were still optimistic though, with 74 per cent thinking global stock markets will rise over the next year, an all-time high. This led 69 per cent to plan to invest in stocks, followed by 52 per cent for exchange traded funds.
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