This is young investors' main source of investing info (Hint: it may not be the best)
Investing from a young age is a great way to grow wealth. In fact, once you're all set with an emergency fund, it pays to put your extra money into a retirement plan and invest there. At the same time, you may want to open a brokerage account so you don't face the same restrictions you will with an IRA or 401(k), which penalize you for removing funds before age 59½.
But how should you invest with that brokerage account? There's a world of options, from stocks to bonds to cryptocurrency. Determining which is right for you boils down to doing your research, and some younger investors may be a bit limited in where they're researching.
The dangers of social media as an investing guide
There are plenty of investing websites that can teach you how to analyze options for your money and choose the right ones. There are also financial advisors who can set you on a solid investing path and fill in your knowledge gaps.
But many younger investors aren't turning to these sources for investing tips. Instead, they're turning to social media.
In a recent Motley Fool survey, 82% of Gen Z respondents say they find traditional investing websites trustworthy. Yet 91% of Gen Z investors say they've gotten investing information from social media in the last month.
- 71% used YouTube videos
- 42% went on Reddit forums
- 28% relied on Facebook posts
- 32% looked at Twitter
- 27% checked out Instagram
- 36% watched TikTok videos
Getting information on investing from social media isn't always a bad thing. If you have a friend, for example, who's well-versed in investing and posts videos about it, that's not necessarily a poor source. But you do need to be careful when relying on social media for investing tips, because some people who claim to be experts on the matter may, in fact, be relatively clueless.
Right now, there's a lot of buzz about cryptocurrency, and a lot of people are rushing to buy in. But just because it gets talked about a lot on social media doesn't mean it's the right choice for you. Cryptocurrency is very volatile, and its future is uncertain at this point (meaning, we don't know if it will consistently grow in value, and since it's fairly new, there's more risk in crypto than in traditional stock investing). But if you believe everything you hear on social media, you might assume it's a sure thing.
If you get investing tips from social media, check your sources carefully and only rely on those you can vet. Also, use the information more as a starting point. For example, if someone recommends a stock on a Reddit forum and it interests you, research that stock. Visit the company's website, look at its financials, and see what traditional investing sites have to say about it. (Pro tip: putting [company name] stock price into Google shows you how that stock has performed over the past week, month, year and more.)
Social media can play a role in helping you put together an investing portfolio. Just don't treat it as gospel.