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New Investors Flock To TikTok For Advice

Image via Aaron Weiss on Unsplash

Plenty has been written about the surge in retail trading since the coronavirus outbreak, which has forced people to essentially put their lives on hold with little to do.

The general public's newly-found interest in trading stocks could be explained by a variety of factors. Boredom, stimulus checks, commission-free trading, lack of sports to bet on, or hopes of making a quick profit are all valid theories.

Robinhood has undoubtedly fueled much of the spike in retail trading activity. Robinhood reportedly added 3 million new funded accounts in the first quarter. For contrast, Schwab, TD Ameritrade and E-Trade added 1.7 million new funded accounts combined.

For many retail traders, sites such as Twitter, Stocktwits and r/wallstreetbets have become popular destinations to track the markets and find the popular stocks of the day.

With younger retail traders now swarming the market, it was all but inevitable that TikTok, which has quickly become one of the most popular social media platforms, would become the latest hotspot for financial advice.

The #investing tag on TikTok has grown to 278.1 million views as of mid-June, while other tags such as #investing tips, #realestateinvesting and #investing101 have tallied millions more.

While getting younger people to learn the basics of finance and investing is important, the likelihood of new investors not being properly educated on the risks of investing remains a concern.

Doug Boneparth, a financial advisor and president of Bone Fide Wealth, is concerned TikTok accounts with large followings are promoting day trading and get-rich quick schemes.

"I don’t have too much of a gripe with going into basics," Boneparth said. "My reservations come into play if someone makes it light work or says it’s easy to make money in the markets. I can assure you that it’s not."

TikTok's community guidelines say the company will remove content that "promotes fixed betting, get-rich-quick schemes, or any other types of scams." However, the community guidelines don't necessarily prevent people who have no qualification to provide investment advice from doing so.

As a new generation is drawn in to the stock market, hopefully TikTok and other social media companies which have become hotbeds for nefarious financial advice will implement rules that can help protect these new investors.

If they don't, the risk of new investors making costly financial decisions could lead to more sad examples of someone taking their own life, which is "not worth losing your life over."

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