Investing in stocks is serious business, often requiring professional advice or thorough research. However, a new trend sees people turning to social media, especially TikTok, for investment tips from 'finfluencers,' raising concerns about the reliability of their advice.
What Happened: A report from BestBrokers found that over 64% of the stock predictions made in the 20 most-watched stock-picking videos on TikTok in 2023 turned out to be accurate, including significant rallies in AI stocks like $NVIDIA (NVDA.US)$ and $Qualcomm (QCOM.US)$.
"Our findings show that over 64% of the 87 total stock predictions in these videos came out accurate, including the remarkable rallies of AI stocks such as Nvidia and Qualcomm," the BestBrokers report said.
The report found that most influencers recommended blue-chip stocks like Google's parent company $Alphabet-C (GOOG.US)$, Nvidia, and $Amazon (AMZN.US)$ , similar to traditional financial experts' advice for lower-risk investments.
Experts interviewed by CNBC, such as Gerald Wong of Beansprout and Jeremy Tan of Tiger Fund Management, expressed skepticism about the reliability of these finfluencers. They noted the broader U.S. stock market performed well during the study period, which may have influenced the results.
Jiang Zhang of First Plus Asset Management highlighted concerns about the unregulated nature of these influencers and potential conflicts of interest. Despite these warnings, experts acknowledged that finfluencers help spread financial literacy among younger investors.
Why It Matters: The rise of financial influencers on platforms like TikTok comes at a time when financial literacy in the U.S. is alarmingly low. A report from the Global Financial Literacy Excellence Center revealed that the average American scored just 48% on a financial literacy test, with only 16% scoring between 75% and 100% in 2024.
Personal finance expert Suze Orman has also highlighted the issue, estimating that 95% of Americans struggle with financial literacy. This lack of knowledge makes the public more susceptible 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 was criticized for allegedly falsifying his educational credentials, casting doubt on the authenticity of many online financial advisors.
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote