This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: Investment advice is only a scroll away. But new research from the University of Georgia suggests social media may leave some investors feeling more knowledgeable than they actually are.
The researchers found that people who relied on social media to guide their investment decisions felt very confident in their investment knowledge. But they struggled to answer basic questions about topics like corporate stocks and short selling. People who got their investment information from traditional media, such as newspapers, magazines, TV and radio, felt like they knew their stuff and actually did.
"People have a lot of ways to access information now," said Xiaoyuan Sun, first author of the study and a doctoral student in UGA's College of Family and Consumer Sciences. "But if they're getting their investment information off social media, they probably don't know the deeper things. They don't know how it works, and they cannot verify that an investment product is the right fit for them." "Basically, we find that when people are using social media, it increases their confidence but not their real knowledge," added Swarn Chatterjee, corresponding author of the study and a professor of financial planning, housing and consumer economics.
To determine whether investors' confidence matched their actual knowledge, the researchers relied on data from two national surveys of more than 2,500 U.S. adults with investments outside their retirement accounts. People were first asked to rate how much they thought they knew about investing on a scale from 1 to 7. Then came the reality check.
The respondents answered 11 multiple-choice questions about investing, covering everything from stocks and bonds to risk and return, index funds, short selling and options. The survey included questions such as "have you ever purchased a 'meme stock' or other investment that was trending on social media?" and "have you ever heard of bitcoin or cryptocurrencies?" The survey also asked whether respondents relied on social media groups or message boards when choosing investments and whether they used platforms like YouTube, Facebook, Reddit and TikTok to learn about investing. More than one in four said they used social media for investment information, while about one in five relied on it when deciding what stocks to invest in.
Meanwhile, nearly 75% used traditional media for investment information. The study found that participants who used social media for information tended to trade more often than those who preferred traditional media sources. Chatterjee said the fear of missing out, or FOMO, may play a role.
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