Beyond Reddit: How Social Media Is Insinuating Itself Into The World Of Investing

Published on

The role of social media in investing has grown rapidly in recent years. The greatest proof of this influence came in the form of Reddit’s WallStreetBets forum, which drove the valuations of many heavily shorted stocks significantly higher at various times throughout the first half of 2021. The retail investors who had read and posted on WallStreetBets were seeking retribution for the perceived wrongs of the many hedge funds that had shorted those stocks by purchasing them, driving their prices higher.

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q3 2021 hedge fund letters, conferences and more

Ben Bilski, founder and CEO of NAGA Group, joined ValueWalk’s Cristian Bustos to talk about social media’s impact on investing and NAGA’s new native $NGC token support for all its products.

NAGA defines itself as a “leading multi-asset neo-broker powered by a social network.” It combines retail investing on 1,000 markets, cryptocurrency, and payment apps, serving 1 million accounts in 100 countries.

  1. Young investors are turning to social media "gurus" for investment advice. What are the inherent risks in this practice?

BB: While there are some wise investment influencers with proven track records, the majority of advice you can get online should be taken with caution. Nowadays, anyone can open TikTok, pick any asset and record a video saying it will go to the moon without taking any responsibility. And in many cases, it turns out to be a typical pump-and-dump scheme in which the social media gurus exit right after creating a fear of missing out (FOMO) and talking their followers into investing in their highlighted assets. Thus, the risks are being misled about an investment opportunity and losing money because of it.

  1. Do you think trading platforms - that of course allow quick access to the world of investment - are influencing or could be associated with the use of social media as an investment information source?

BB: Yes, personal finance is generally not taught in schools, and most people desire more money for themselves. Hence, financial education has become a huge trend on all social media platforms. And now that investing is becoming more accessible than ever and young people are becoming millionaires quickly with leveraged trades, the profits made attract more people to the influencers who teach how to achieve such results.

  1. How savvy and educated would you say young investors are at present?

BB: If they dive deep into the investment world, I'd say they could be better off with the information channels we have nowadays than someone who learned about investing at college. Nowadays, many assets are driven up with popularity, and spotting such assets is possible if you scan what people are talking about in investing forums, chats and social media.

  1. Since Gen Zers have indeed involved themselves in the world of investing, how different are they from Millennials, and how are financial institutions responding?

BB: I'd say they are more open-minded than older generations that are used to investing in assets that grow in value slowly over time. I believe they see it as an amazing opportunity in these times to avoid the slow and hard route of life and instead invest in some assets and turn thousands into millions within a year or less. There are plenty of examples of such successes by young people with no education or decades of investing experience.

  1. Social media is the main source of crypto investment information among young investors. What is the impact of this issue given, for example, bitcoin’s high volatility and the overall lack of regulation of the crypto space?

BB: It may not be an issue from their perspective as they are used to that kind of information gathering and prefer it over books and traditional education. Regarding the impact, we live in an attention economy, so when more content creators put out investment information, more beginners start to invest, more new money flows into the markets, and more volatility appears. Two potential issues for beginners might be not understanding how to control emotions, namely, fear and greed, and when it might be wise to take profit or cut losses.

  1. NAGA just added native $NGC token support in all products. What are the benefits for users, especially inexperienced ones?

BB: We implemented $NGC in the product that is most used by beginners: NAGA Autocopy. Now, users can save 50% in Autocopy fees by paying the fees with $NGC instead of, for example, USD or EUR. And unlike fiat currencies, $NGC value grows, hence, making it possible to invest in $NGC now to pay much less in fees later in the future. Many beginners and experienced investors are using this opportunity, and as a result, $NGC has increased in value rapidly over the last few weeks.