Finance Influencers Seeing Their Stock Rise In The Digital Marketing Space
The COVID-19 pandemic has had a massive impact on the lives of nearly every living person on this planet. Aside from the toll it has taken on the health and wellbeing of citizens around the world, it has also struck a devastating blow to the economy.
The economic downturn that the Coronavirus induced swelled unemployment rates for Americans by more than 14 million – from 6.2 million in February 2020 to 20.5 million in May 2020. In turn, the U.S. unemployment rate skyrocketed from 3.8% in February – some of the lowest on record post-World War II – to 13.0% in May.
Those who were lucky enough to survive the initial windfall became anxiety-ridden, wondering themselves if they were on the verge of losing their jobs. And those who remained working in some capacity began adapting to a new normal; working from home with reduced hours due to lockdowns and self-quarantine.
This increased time at home explains the dramatic increase in social media consumption during recent months. Rising search interest in the property market and stimulus packages on the internet also indicate that people’s desperate need for new income opportunities is an undeniable truth that faces many people today.
While many industries struggled to weather the storm and emerge intact, other industries flourished. Increased screen time and stay-at-home orders spurned huge usage growth in sectors like gaming and social media. It also began to ignite an increased interest in stock trading, as more and more people found themselves looking for ways to potentially create additional sources of income.
As social media usage continues to grow, so do the profiles of its online creators. Influencers are becoming increasingly vital assets for brands, and this includes financial influencers, who have seen a surge in popularity and viewership during recent months. Many of these influencers are helping new investors find opportunities and make intelligent, well-informed investment decisions as they begin their journey into the stock market.
Instagram, TikTok, Youtube, and other social channels are now extensively used by new investors as part of their market research. Besides their easy access and convenience, both newbies and day traders prefer these platforms because they contain engaging, unbiased, and easy-to-understand information. Studies show 47% of new investors regard social media as their go-to tool for investment research.
The Rise Of Retail Investors
Just a few short weeks ago, the stock of companies like GameStop and AMC had the entire market buzzing, and it very well may have shifted the tides of future trading regulations.
By driving up the share price by as much as 1,600% despite the odds, retail investors have shown how impactful they can be on the stock market. Heavy criticism from institutional investors accusing retail investors of making uneducated investment decisions did not prevent 1.7 million new investors from opening their first brokerage account with Robinhood in Q2 2020.
Investment apps like Robinhood, Webull, and Wealthsimple have seen a surge in their users during the pandemic, and these apps partner with influencers like Graham Stephan and Andre Jikh to promote their investment platforms. With the facilities that these apps provide in conjunction with the bonuses from influencers, retail investors are jumping on this opportunity to maximize their portfolio returns.
In many ways, these apps provide all the essential information that an institutional broker would. Retail investors can choose their stocks, analyze the performance of both their stocks and overall portfolio, and transfer their funds as they wish. The best part for most new investors is that it’s all without any broker’s fees. The use of these apps has increased financial decisions made on mobile phones by over 45% from 2019 to 2020.
Young investors do not want to follow the Wall Street investment banks’ advice. Watching institutional investors and others get rich regardless of the economy’s state only encourages them to want their share of the pie. Whether it be a result of an anti-establishment mindstate or a simple preference on their source information, they obtain actionable and profitable investment advice from investment influencers they trust.
According to Michael Batnick of Ritholtz Wealth Management, although retail investors get harshly criticized for poor investment decisions, it only makes them more proactive. They see contradictions from institutional investors as an attempt to discourage them. Indeed, institutional investors want regulations enforced to limit retail investors’ access to the stock market following the recent increase in retail trading because of easy to open and zero-fee stock trading apps like Robinhood. But many investors see this as hypocrisy, noting that hedge fund managers and investment capital groups take short positions all the time and reap the fruits of their labor. For some, it appears to be a “have your cake and eat it too” mentality that is good for the goose and not necessarily the gander.
The Growing Demand For Stock Influencers
Investment influencers are experiencing a massive spike in their viewership. Personal finance experts & YouTubers Nate O’Brien and Brian Jung, and TikTok investment guru Errol Coleman, and many others, have experienced a dramatic increase in followers in recent months, many of whom are seeking investment advice in the time of the Coronavirus pandemic. These experts are recognizing the value and desperate need for their knowledge and expertise, and as a result, they are beginning to dominate social media platforms. They are growing their follower counts by sharing meaningful and actionable content in the form of listicles, articles, and short videos on social platforms and personal blogs to help their audience navigate this global crisis and grow their finances.
It almost goes without saying that there is no shortage of investment advice on social platforms. Besides novice investment advisors, retail investors gain valuable market insights from top-notch experts, e.g., Financial Advisor, CEO, Author with 1.1 million followers – Josh Brown, Millionaire by the age of 26, Real Estate Investment Advisor with 363K followers – Graham Stephan, and Financial Educator with 378K followers – Ryan Scribner.
However, some self-proclaimed investment gurus on the internet are accused of building credibility by sharing a twisted version of their lifestyle and giving out advice contradicted by investment experts. This has raised concerns among institutional investors.
In response, names like “dumb-money” have been thrown around investment circles as means to mock these novice investors, including the use of slang words like “stonks” (an intentional misspelling of “stocks”) incorporated into memes on the internet in another attempt to poke fun at rookie investors for their poor understanding of the stock market and ill-informed financial decisions. We will touch on that more later.
Financial Influencers Empower Newbies
According to Goldman Sachs, retail investors had some big success in 2020, even outperforming many hedge funds. The investment advice from social media chat rooms, especially one at Reddit known as r/WallStreetBets, was solely responsible for driving up the GameStop and AMC Entertainment stock price. Robinhood’s zero-commission approach worked, and others like Charles Schwab, E-trade, and TD Ameritrade soon followed in its footsteps.
Data collected from Robinhood and Charles Schwab reveal that the average retail investor is under 40, and most of them are first-time traders and come from low-income households. With this in mind, it’s fair to say that investment influencers enabled even the middle class to make large returns through the stock market, something previously only affluent traders could pull off.
Investment influencers help overcome the financial illiteracy of young investors and empower them to make informed decisions by understanding both the risks and benefits of different financial decisions. The number of retail investors is growing rapidly, as influencers help to reduce their dependence on brokerage firms and apps like Robinhood allow direct trading. Investment influencers act as research analysts for retail investors, similar to how institutional investors have people work financial data for smart decision making. Investment influencers are the key players that are keeping retail investors up to date with all the news that affects market sentiments.
“Stock & Finance influencers are so unique in the influencer landscape because they’re literally proven influencers. In this world, you’re either providing value to your audience, which skyrockets your following & engagement or you don’t and you end up with an engagement rate of less than 1%. The reason audiences stick with this vertical of influencers is because they are constantly providing tactical value which their audience appreciates and takes action on. I would say Stock & Finance influencers are the most influential in the landscape.”
-Michael Feldman, Director of B2B Influencer Marketing at Viral Nation
A New Way Of Learning Finances
Investment influencers are now using social media platforms like YouTube and TikTok to reach their audience. While Twitter remains a spitballing forum for the Wall Street ‘players’, YouTube and TikTok are establishing a new way of educating people on investment and stocks. The content that they provide is more engaging and appropriate for the targeted audience of young retail investors. Through their videos and various forms of content, the impact of their message is greater compared to Twitter’s approach to reading comments and threads only.
YouTubers like Stock Moe have gained thousands of subscribers in a short time frame, as retail investing has grown in recent months. His knowledge of non-equity options (NEO) allows him to dissect the subject into smaller parts to educate his audience. Dave Ramsey, famous for his budgeting and money-saving strategies, has a show where people can call him to ask for his advice and opinion on their financial problems.
With real-life examples, investment influencers relay their knowledge and information to their followers in a relatable approach. They are esteemed as the experts that beginner retail investors will turn to, which can be described as the halo effect.
Halo effect is the tendency for positive impressions of a person, company, brand, or product in one area to positively influence one’s opinion or feelings in other areas. Halo effect is “the name given to the phenomenon whereby evaluators tend to be influenced by their previous judgments of performance or personality.”
The content and advice that investment influencers provide are highly accepted and applied by their audience, putting investment influencers in stronger positions. With many investment influencers focusing their content on what stocks to buy or sell, they have more influence on the narrative of the stock market in its entirety.
Benefits Of Having Stock Influencers On Your Side
Influencer marketing is predicted to become a $10 billion industry in 2022, and new investors rely on the information available on social media channels. On these platforms, influencers are the thought leaders, controlling the narrative and driving investors’ investment decisions. It is a terrific opportunity for businesses to have influencers recommend investing their stock.
Almost 90% of businesses agree influencer marketing generates a better return on investment compared to other marketing strategies. Spreading stock stories through micro-influencers is a great digital strategy to grow your social audience. Investment influencers are more effective when compared to celebrities people do not follow for investment advice, and their endorsements can create long-term benefits for businesses.
With investor marketing tactics, businesses can quickly reach target markets and raise investments in their stock faster. Young investors’ dependence on social media for investment advice has created an opportunity for businesses to increase awareness of their stock stories.
Sophie Schmitt, a Senior Analyst with the Aite Group, believes what happened to GameStop stock is evidence of the power investment influencers on social platforms hold and predicts this trading trend will soon become the norm among new investors.
As mentioned above, new retail investors form part of the millennial generation. They have the most spending power of any other generation, and millennials are ready to buy products that will help them in their journey towards financial freedom. FINRA issued a study stating that millennials do not feel financially secure and are looking for educational content that will help them in achieving their financial goals. The findings of this study correlate with the statistics of the rise in retail investors and investment influencers.
Financial businesses can use investment influencers as their spokesperson to promote their financial services to millennials. Any product or service that investment influencers may recommend will be considered and purchased in volume by their followers due to the trust and loyalty they share for these financial influencers. Brands are already seeing the return from investing in influencer marketing and are eager to see what else can be achieved through financial influencers, as well.