Half of Gen Z Makes Investment Decisions Based on Social Media Advice. Should You?

Social media has become a part of our daily routine. From keeping up with loved ones to starting new friendships, social media has become a hub of social interactions. While it is commonplace to use social media to keep up with the Joneses, it might be concerning to think about someone making an investment decision based on social media advice.

According to the 2023 Charles Schwab Modern Wealth Survey, more than half of Generation Z members are doing just that. They are not only following influencers for fashion advice, but also turning to them for advice on investments. This raises the question: Should you allow social media to influence your investment decisions?

A majority of Gen Zers use social media for financial advice

According to the survey, nearly 60% of Gen Zers follow influencers on social media who provide financial advice. Additionally, 53% of respondents acknowledged that their perception of wealth is influenced by the content they encounter on social platforms.

Moreover, over 50% of this generation's members make purchasing decisions based on what their friends and influencers showcase on social media, while an equivalent proportion also base their investment choices on the same content.

This data highlights the considerable impact that social media has on the financial decision-making process of Gen Zers, emphasizing the importance of having responsible content on social media.

Pros of using social media for investing decisions

If you are an avid social media user, it is only natural to check out some influencers for guidance on investment decisions. Some influencers provide valuable insights, share trading and investment tips, and even analysis of some specific stocks.

Many influencers are able to make investment topics easier to understand. Influencers are able to educate and entertain at the same time. Social media can be a great way to learn about new investment opportunities.

By following influencers who are knowledgeable in the finance industry, you can stay informed about new trends and opportunities that you might not have known about otherwise. The biggest benefit is that social media has made finance topics more accessible to the general public.

Cons of using social media for investing decisions

However, the validity of the data and information shared by these influencers may not always be dependable. Many of these influencers do not have any professional training or expertise in the field of finance, so they may not be the most reliable sources of advice.

What's more, some of these influencers may have a hidden agenda, and they may not always have the best interests of their followers in mind. It's important to differentiate between legitimate financial advice and paid promotions.

Many influencers who share financial advice on social media are being paid by companies to promote their products. These paid promotions might not necessarily be the best financial decision for you.

Additionally, social media influencers often have a different lifestyle and income level compared to the average person. They might be successful business owners or celebrities with millions of dollars in their bank accounts. This means their financial advice might not be applicable to your personal situation.

Tips for using social media for investing decisions

If you do decide to use social media for investment decisions, you need to be extra cautious. Set up filters, choose the right sources of information, and do thorough research before making any investment decisions.

It would help if you also used credible financial sites to cross-check this information. If you are not careful, you could land in hot water -- financially speaking. It's essential to take any advice with a grain of salt and make informed decisions that align with your own financial situation.

Social media has become an integral part of our daily lives, including our financial decisions. While over 50% of Gen Zers make investment decisions based on social media, it's important to consider the credibility of the advice provided. However, social media can also provide valuable information and education about new investment opportunities. It's essential to have other sources of information and to do your research as well. By taking a more thorough approach to vetting investment advice, you will be empowered to make the best financial decisions for you.