It’s no secret that social media has become a critical tool in how we choose to communicate. Facebook, Twitter and LinkedIn have very quickly become the preferred channels for people to get information about anything and everything, from news and weather reports to health and wellness and movie reviews.
So it’s no surprise that research also shows investors--both individual and institutional--are increasingly turning to social media for information to help them make investing decisions. There are a couple of key reasons for this: the information is available in real time and it’s coming from peers (people they “friend” on Facebook, follow on Twitter or connect with on LinkedIn), which builds in a layer of trust.
Too Much Unvetted Info?
While access to information is a good thing, access to too much information that has not been properly vetted is not. It can lead to information overload and, in some cases, just misleading or wrong advice that simply isn’t in your best interest.
Due Diligence Best Practices
As an investor, it’s up to you and your Investment Advisor, if you’re working with one, to conduct your own due diligence on what you’re reading and seeing on social media. Here are a few best practices to help you sort through all the noise.
- Start with the source. Who is providing the information? Is what they are saying fact or opinion? Do they have an agenda with respect to the investments they choose to endorse or dismiss? This goes for “experts” you may be following and peers who may be recommending a hot tip. In some ways, social media is an update on water cooler or playground sharing of investment strategies only coming from many more directions all the time.
- When you read about a “good investment” in the media--any media--it’s probably too late to get in on the upside. Getting caught up in the always-on social media news cycle can also promote emotional investing and the behavior you want to avoid: buying high and selling low.
- Assess the advice you’re getting based on how it fits with your investing objectives. Is it right for you even if it is a good investment? Does it reflect your risk profile and time horizon? Don’t go off the path/plan you have mapped out. That’s when you get into trouble. Having an advisor can help you stay on track--in good and bad times.
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Source: LinkedIn Business