Some call it StockTok, others FinTok. But whatever you choose to call it, the rise of Generation’s Z’s version of #FinTwit is a cause for alarm. Of course, there’s sensible advice on there if you look hard enough. But, the focus is very much on day trading and how to “get rich quick”. It’s not a good place for young people to be going for financial education.
TikTok is no longer reserved for dancing or cat videos. In an unlikely twist, content on the platform tagged #Stocktok, referring to investment content, now has around 100 million views.
So how did finance come to be so popular on the social platform? And why should users be cautious about the advice they’re seeing?
TikTok is a video-sharing platform on which users can film short-form content of up to 60 seconds’ duration to share with their followers.
The social platform is free to join and accessible the world over. In 2020, the app has over two billion downloads worldwide. The majority of users sit within the 18-24-year age range, and it seems to be slightly more popular with women than men.
The site is most famous for its musical challenges, but more recently the subject of investing and finance have taken centre stage.
For some, the increased visibility of finance among young users is a positive step forward in financial education. Many, though, fear the potentially catastrophic consequences of misinformation.
The danger of misinformation
Research from the TIAA Institute has found that millennials “display shockingly low levels of financial literacy”. And yet, recent months have seen a massive increase in the number of young people trading stocks from home.
Consider, then, a platform bursting with young users lacking the education to make informed decisions about money. They want to get rich quick and are looking to the influencers shouting the loudest about how to do just that.
As The Institutional Investor reported, though, some of the most viewed influencers are rarely what they seem.
Qualifications and experience are notably lacking from their bios. Instead of establishing their expertise and offering sage advice, these content creators are boasting about huge returns. They encourage irresponsible actions instead of taking the time to serve and educate their audience deeply.
The TikTok advice gap
Of course, it’s not all as black and white as correct and incorrect information. One of the risks of using TikTok to learn about investment is the restrictive duration of content.
Videos on the platform are limited to 60 seconds’ duration. Many have pointed out that this simply does not allow content creators to give accurate information to their followers. Even the most succinct of educators would struggle to fully explain the intricacies of annuities in such a short window.
This means that sometimes even well-meaning content in fact becomes misleading. Where there is room for interpretation, there is room for errors in judgement.
The potential for catastrophe
Of course, the danger in misinformation is not purely in the content. The danger is in the implementation of that advice.
During the COVID-19 pandemic, stock trading from home grew almost as quickly as working from home did. Apps including Robinhood have made day trading accessible to the masses. It has done so by removing fees, minimum balances, and complex systems from investing.
This means that “young people with little or no understanding about the principles of investment can be let loose on complex derivative products like options during the most volatile markets since the global financial crisis”.
In July 2020, the worst possible outcome came true for one young day trader. Believing that he had made a loss of $750,000, a 20-year-old University of Nebraska student took his own life. What’s even more upsetting, is that he had in fact misunderstood his account balance: he had lost nowhere near that amount.
The tragedy has highlighted the true risk of unprecedented access to investing without the necessary support and guidance of industry professionals.
From a financial education standpoint, there are some encouraging signs emanating from TikTok.
The fact that so many young people are paying attention to financial matters is one silver lining. Also, there are some rather more positive influencers starting to make their mark on #StockTok, including Ian Bloom, Humphrey Yang and Tori Dunlop.
The question now is, Can quality financial advice start to outshine the damaging clickbait currently stealing the show?
TEBI is regularly posting content aimed at young adults. Here are some recent artless we think you will enjoy:
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