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Warning about TikTok investment advice

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Written by: Emma Lunn
26/04/2021
Financial experts are warning against the dangers of 'StockTok' – risky trading advice and misleading information shared by unqualified and inexperienced social media ‘influencers’.

TikTok videos with the hashtag #Investing have so far racked up more than 2.2 billion views on the video sharing site, opening up a world of investing to millions of younger people. However, many won’t understand that they could lose all their money if things go wrong.

‘FinTok’ content includes both users sharing their trading wins and losses and people selling investment courses.

Ben Hobson, markets editor at Stockopedia, said: “Economic turmoil and low trust in financial institutions has left a generation of investors thinking differently about where they invest and who they listen to. In fact, according to brokerage Charles Schwab, 80% of millennial and Gen Z investors believe recent economic difficulties are making it harder to get good investment returns.

“With social media platforms like TikTok enjoying huge global reach, it’s no surprise that they’re now influencing the investment decisions of millions around the world.”

Hobson points to the now infamous trading frenzy in US games retailer GameStop Corp as an example of how ‘viral’ trends can have a huge impact on individual securities. The saga was intensified by TikTok videos encouraging viewers to take considerable financial risks in return for what they portrayed as a guaranteed win. But for many, the episode simply resulted in losses.

Hobson said: “Events at GameStop and other stocks like it have raised fears that apps like TikTok are a new frontier for the kind of stock market manipulation regulators have been battling for decades.”

“Part of the problem is that the sense of community on social media platforms can lead to herd mentality. This psychological togetherness is what makes the apps popular. But it’s a huge risk in investing and it’s often blamed for whipping up manias and bubbles.

“Sadly, it’s the unprepared amateur investors that are most likely to be left with stomach-churning losses when the frenzy dies down.”

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