Stock investing is serious business and often requires expert advice and thorough research, but a new trend of people seeking investment tips from “finfluencers” on social media, particularly TikTok, has raised concerns about the reliability of their advice.
What happened: A BestBrokers report found that more than 64% of stock predictions made in TikTok's 20 most-watched stock-picking videos in 2023 were accurate, including big gains for AI stocks like NVIDIA Corp NVDA and Qualcomm Inc QCOM.
“Findings show that of the 87 stock predictions featured in these videos, over 64% were accurate, including impressive gains for AI-related stocks such as Nvidia and Qualcomm,” the Best Brokers report said.
Most influencers recommended blue-chip stocks like Google-parent Alphabet (GOOGL), Nvidia, and Amazon.com (AMZN), similar to the low-risk investment advice from traditional financial experts, according to the report.
Experts interviewed by CNBC, such as Gerald Wong of Beansprout and Jeremy Tan of Tiger Fund Management, expressed skepticism about the reliability of these financial influencers, noting that the overall strength of the U.S. stock market during the survey period may have influenced the results.
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Jiang Zhang of FirstPlus Asset Management pointed to concerns about the unregulated nature of these influencers and potential conflicts of interest.Despite these warnings, experts acknowledged that financial influencers are helping to spread financial literacy among young investors.
Why it matters: Despite the rise of financial influencers on platforms like TikTok, financial literacy is shockingly low in the U.S. According to a report from the Global Center for Financial Literacy Excellence, the average American will score just 48% on a financial literacy test, and by 2024, only 16% will score between 75% and 100%.
Personal finance expert Susie Orman also points out this issue, estimating that 95% of Americans struggle with financial literacy. This lack of knowledge makes people susceptible to misinformation and potentially harmful financial advice from unverified sources.
The credibility of financial influencers has been called into question before: In 2023, Indian social media finance personality Ravistajani Kumar was criticized for allegedly falsifying his educational background, casting doubt on the reliability of many online financial advisors.
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This story was produced with Benzinga Neuro and edited by Kaustubh Bagalkote.
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