Social media has hooked young investors on finance, but a growing number are taking more and more risks. ‘Finfluencers’ and money experts say it’s time for some caution.

young people on phones
Young investors can make mistakes that can end up costing them

  • There has been an increase of financial education and advice content on social media apps, enticing young investors.
  • Recent research shows that young investors are following riskier, more short-term strategies to make profits.
  • ‘Finfluencers’ and money experts alike urge have urged young investors to be cautious.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The rise of ‘finfluencers’ and huge surge in financial content on platforms like TikTok, Instagram and Twitter over the past 18 months has hooked a new generation on finance and investing.

Young investors are spending their spare cash on cryptocurrencies and stocks – with a large number of them following the advice they got from scrolling through social media, lured in by promises to get rich quick and beat the system.

Videos tagged #finance, #investing or #stocktok on TikTok have billions of views – a total of 7.5 billion at time of writing. Clips hyping stocks that are “going to the moon”, promising consumers they can easily turn $10 into $10,000 or kickstart a “doge revolution” dominate the financial social media scene and drown out educational content.

“The FOMO culture that dominates social platforms like TikTok, Reddit and Instagram has become a breeding ground for the marketing of high-risk investments shunned by the mainstream investment industry – often for good reason.” Myron Jobson, personal finance campaigner at Interactive Investor, told Insider.

Recent surveys have shown young investors are pursuing riskier strategies than older generations. Last month, Barclays research showed 21% of Gen Z investors are investing to take advantage of current market conditions and 16% are trying to “play the markets”.

Interactive Investor published a survey earlier this month showing more than half of young investors who have purchased bitcoin or dogecoin have done so using debt from credit cards, student loans and other types of loans.

A Motley Fool study conducted earlier this year showed that amongst Gen Zers particularly, social media plays a key role in how they make their financial decisions.

Not all financial social media content can however be labeled the same. With the same hashtags that promote questionable investment and financial advice, there are videos with sound advice explaining Roth IRAs, how to increase your credit score or the benefits of long-term investing.

Tori Dunlap, a money expert who started her first business at age nine and accumulated $100,000 worth of savings by age 25, is one of the ‘finfluencers’ who shares such content as part of her brand Her First $100K on TikTok.

She said even before TikTok, bad financial advice was everywhere – it was just delivered through a different medium. Her main issue with the app is the 60-second time limit on videos. This feature was recently removed, but longer videos are still rare.

“I have a lot of parameters because I only have a minute and so I am using TikTok hopefully for folks as a jumping off point of like ‘I’m giving you this bit of education, now go read about it,'” she said in a recent interview with Insider.

Dunlap believes problems arise when consumers stop questioning the content they are taking in – after receiving good advice once, it’s easy to keep trusting what you see online, she said.

“You have to go ‘does this seem too good to be true?’ and if it seems too good to be true, it probably is. Or, just google the person.” she said.

Jobson agrees – he recognizes some content is helpful, but warns consumers to approach online investment advice with caution and to check the credibility of those who are giving it.

“There are some good materials out there to help people on their investment journey, but, more generally, we have seen concerning social media posts.” he said. “The advent of broader online ‘influencers’ has seen rise of so-called ‘financial influencers’ – many of whom haven’t got a clue on what they are talking about to put it bluntly.”

Read the original article on Business Insider

10 things before the opening bell

gamestop store

Good morning and welcome to 10 Things Before the Opening Bell.

If this was forwarded to you, sign up here. Plus, sign up here for Insider Investing, our weekly markets analysis newsletter.

Let’s get started.


1. The markets have got off to a nervy start. Rising COVID cases and a ton of key data are making for cautious session so far.

2. El Salvador has made bitcoin legal tender. JPMorgan says this will pose serious problems for the entire network.

3. Earnings season is almost upon us, and most experts are expecting historic profit growth. UBS says to buy these 20 stocks ahead of what should be an especially volatile and lucrative period.

4. Tesla flashed a “death cross” for the first time since 2019. The last time this happened, the electric vehicle giant took a 45% decline. Signs are pointing to a downspin, but some investors think it’s just a fluke.

5. The hedge fund that bet against GameStop is bleeding – bad. Melvin Capital was down 46% in the first half of 2021, Bloomberg reported. Read why Redditors have them slated as public enemy No. 1.

6. Peter Thiel has entered the chat – and he’s bringing crypto. Lots of crypto. In yet another indicator that crypto promises to be a big player for the future, Bullish is going public via a $9 billion SPAC merger. Get the details here.

7. The DOJ caught a man who tricked thousands out of crypto payments. A Swedish national swindled $16 million from unsuspecting victims over the course of nearly a decade. After pleading guilty, the crypto-schemer is looking at 15 years in prison.

8. Did you drop all your pandemic DIY projects? You’re not alone – less and less people are buying lumber. Prices dropped for a ninth consecutive week, and the price for lumber has slid 60% since it peaked in May. Bank of America analysts gave a few reasons for this.

9. Your ultimate crypto reading list. Here are 27 books that experts say everyone should read to better understand digital currencies and invest in them profitably.

10. Warnings about a stock market crash are growing louder. Here are 9 indicators that show just how precarious a position stocks are in.


Sign up for more Insider newsletters here.

Read the original article on Business Insider

Deliveroo’s share price tumble dents CEO Will Shu’s fortune by $144 million during opening hours of trading

Will Shu, Deliveroo CEO and Founder, inaugurates its first Deliveroo kitchen site in France, called Deliveroo Editions on July 3, 2018 in Saint-Ouen, France.
Will Shu, Deliveroo CEO and cofounder, inaugurates its first Deliveroo kitchen site in France, called Deliveroo Editions on July 3, 2018 in Saint-Ouen, France.

  • Deliveroo CEO Will Shu saw the value of his stake in the firm fall to $474 million on its stock market debut.
  • His stake was worth $618 million at the opening share price, but fell as investors shunned the IPO.
  • Shu is also thought to have sold shares worth around $36 million when the firm listed.
  • See more stories on Insider’s business page.

Deliveroo CEO Will Shu is a wealthy man after the food delivery firm he cofounded floated on the London Stock Exchange on Wednesday.

Shu, the largest individual shareholder at Deliveroo, is thought to have sold around 6.7 million shares when the market opened, at the opening price of £3.90 ($5.35), making $36 million from that transaction.

The value of his remaining 6.3% stake is not currently as high as anticipated, after shares in the firm tumbled as much as 30% on its debut.

At the time of writing, the drop has seen Shu’s stake in the firm plummet to a value of $474 million in the opening hours of trading, down $144 million from $618 million at open.

The company’s listing price range for the IPO was between 390 pence ($5.35) and 460 pence ($6.33). At the higher end of the range, Shu’s stake would have been worth as much as $729 million.

Shu’s stake will fluctuate throughout the day and its value could end up being higher or lower by market close.

Read more: Here’s the 5 things investors need to know ahead of the Deliveroo IPO

Deliveroo’s IPO gave it an opening valuation of about $10.5 billion but it shed more than $2.7 billion in market value in its first hours as a public firm under the ticker “ROO.”

The company, founded in 2013 by Shu and his friend Greg Orlowski, has faced criticism from large investors and activists in the run-up to its IPO over its business model.

Deliveroo’s app allows consumers to order grocery and food on demand, and the firm relies on a network of gig-economy riders to ferry the goods out.

At least six investment firms, including Aviva Investors, Rathbones, Legal & General, and Standard Life Aberdeen, announced they wouldn’t invest in Deliveroo. Some cited both its lack of full-year profitability, and the threat posed to future profitability by its ongoing reliance on gig-economy riders.

“Deliveroo has gone from hero to zero as the much-hyped stock market debut falls flat on its face,” said AJ Bell investment director Russ Mould on Wednesday. “It had better get used to the nickname ‘Flopperoo’.”

Read the original article on Business Insider