You can’t get away from social media.
It’s become part of modern life.
But it holds particular dangers for investors.
I have almost 20,000 connections on LinkedIn.
Will this lead people to believe that I’m a good investor?
Probably, according to the experts, because of ‘social effects’.
We place more trust in somebody we know than somebody we don’t.
So, somebody we know gives us an investment tip, we’re more likely to act on it.
That’s in the ‘real world’.
But in the social media world, we’re also connected to many people and we ascribe the same values to them – friends, connections and followers.
Many, if not all, like to talk about their successes and rarely their failures.
People don’t like to advertise their mistakes.
As humans, we are impacted by the information we receive and rarely tend to think about the information we don’t.
The more connections you have, the more information is spread and shared.
If you trade on information you find on social media, you’re effectively trading on bias.
So, be aware of the dangers and don’t act on a social media post before checking the facts.
Always go back to the source.