Investing in the stock market is a serious endeavor, often requiring professional guidance or extensive research. However, a growing trend sees individuals turning to social media, particularly TikTok, for investment tips from self-proclaimed ‘finfluencers,’ raising concerns about the trustworthiness of their advice.
A recent report from BestBrokers revealed that over 64% of the stock predictions made in the 20 most-watched stock-picking videos on TikTok in 2023 proved accurate, including notable rallies in AI stocks such as NVIDIA Corp NVDA and Qualcomm Inc. QCOM. This finding has sparked a debate on the legitimacy of finfluencer recommendations.
While the report highlights the accuracy of some predictions, experts interviewed by CNBC, including Gerald Wong of Beansprout and Jeremy Tan of Tiger Fund Management, express reservations about the reliability of these influencers. They note that the broader U.S. stock market experienced positive performance during the study period, which could have influenced the results. Additionally, concerns arise from the unregulated nature of these influencers and potential conflicts of interest, as highlighted by Jiang Zhang of First Plus Asset Management.
Despite the skepticism, experts acknowledge that finfluencers contribute to spreading financial literacy among younger investors. This is crucial in a climate where financial literacy in the U.S. remains alarmingly low. A report from the Global Financial Literacy Excellence Center found that the average American scored just 48% on a financial literacy test in 2024, with only 16% scoring between 75% and 100%. This lack of knowledge makes the public vulnerable to misinformation and potentially harmful financial advice from unverified sources.
The credibility of finfluencers has been questioned before. In 2023, Indian social media finance personality Ravisutanjani Kumar faced criticism for allegedly falsifying his educational credentials, casting doubt on the authenticity of many online financial advisors. The rise of finfluencers on platforms like TikTok presents a complex situation. While they can potentially increase financial literacy, the lack of regulation and potential for conflicts of interest raise significant concerns about the reliability of their investment advice. Investors are advised to exercise caution and conduct thorough research before making financial decisions based on information from these influencers.
