Social media has changed the way we consume information, and investment information is no exception. Over the past few years, a new breed of financial influencers—‘finfluencers’—has gained massive followings by offering stock tips, market insights, and investment strategies. These influencers offer financial wisdom, often wrapped in slick videos and eye-catching graphics.
But while this may seem like a convenient way to stay updated on market trends, there’s a catch: many of these ‘experts’ lack the necessary qualifications and regulatory approvals to provide financial advice. And that’s where the risks begin.
Most financial influencers on social media aren’t registered with the Securities and Exchange Board of India (SEBI), the authority that regulates investment advisors. While some might have personal experience in the stock market, many simply share opinions rather than solid financial principles.
There’s also the question of conflicts of interest. Some influencers promote stocks they personally own or receive payment from companies to boost certain investments. This creates a situation where their recommendations might not always be in your best interest. Following such advice blindly could lead to costly mistakes.
Social media thrives on engagement, and influencers know that nothing drives clicks more than excitement and fear. Terms like ‘once-in-a-lifetime opportunity’ or ‘market crash incoming’ create urgency, often pushing followers to make impulsive investment decisions.
One common trick is the ‘Fear of Missing Out’ (FOMO). The idea is simple—convince people that if they don’t act now, they’ll lose a golden chance to make money. But investing based on hype rather than research is a recipe for disaster. Rash decisions can lead to major financial losses.
Humans tend to follow the crowd—it’s comforting to do what everyone else is doing. But in investing, this herd mentality can be dangerous. When large groups of people act on the same social media advice, it can create stock bubbles, driving prices up unrealistically. Eventually, when reality kicks in, the bubble bursts, leaving many investors with losses.
A classic example of this was the dot-com bubble of the early 2000s. More recently, we’ve seen sudden market swings caused by social media-driven stock trends. Without proper research, blindly following a trend can be financially disastrous.
Unlike registered financial advisors, social media influencers operate in a largely unregulated space. This makes it easier for scammers to exploit unsuspecting investors. Fake Telegram and WhatsApp groups, for instance, have been caught using the names of well-known market experts to promote shady stock tips.
These scams are not just limited to fake tips—many fraudsters sell expensive, often useless stock market courses or subscription services, luring people with unrealistic promises of overnight success. While SEBI has taken steps to regulate financial influencers, the risks remain high.
So, how can you navigate this landscape safely? Here are a few key steps:
Check credentials: SEBI maintains a list of registered investment advisors. Before trusting any financial advice, verify if the source is credible.
Avoid pressure tactics: If an influencer urges you to act immediately, take a step back and do your research.
Seek professional advice: Instead of relying solely on social media, consult a SEBI-registered advisor for personalised guidance.
Cross-check information: Don’t take social media claims at face value. Look at brokerage reports, company earnings, and economic indicators before making investment decisions.
Social media can be a useful tool for learning about the stock market, but it shouldn’t be your only source of financial advice. The rise of finfluencers has made investing more accessible, but also riskier. While some influencers may genuinely want to educate, many have financial motives that could work against you.
The golden rule? Be sceptical, do your research, and when in doubt, turn to verified financial professionals. Investing is a serious game—don’t let social media be your only playbook.
(By arrangement with livemint.com)
