Investing in stocks is a serious business and often requires professional advice or thorough research. However, a new trend is that people are using social media, especially TikTokfor investment tips from “finfluencers”, which raises doubts about the reliability of their advice.

What happened: A report by BestBrokers found that over 64% of the stock predictions in the 20 most-watched stock-picking videos on TikTok in 2023 turned out to be accurate, including significant price increases in AI stocks such as NVIDIA Corp NVDA And Qualcomm Inc. QCOM.

“Our results show that over 64% of the 87 stock predictions in these videos were accurate, including notable price increases in AI stocks such as Nvidia and Qualcomm,” the BestBrokers report said.

The report found that most influencers recommended blue-chip stocks such as GoogleParent company Alphabet Inc. GOOGLENvidia and Amazon.com Inc. Amazonsimilar to the advice of traditional financial experts for lower-risk investments.

Experts interviewed by CNBC such as Gerald Wong from Soybean sprouts And Jeremy Tan from Tiger Fund Managementexpressed skepticism about the reliability of these finfluencers. They pointed out that the broader US stock market performed well during the study period, which may have influenced the results.

See also: Trump-era White House official Anthony Scaramucci says industry leaders want bipartisan commitment to crypto regulation: ‘We don’t want to fight either side’

Jiang Zhang from First Plus Asset Management highlighted concerns about the unregulated nature of these influencers and potential conflicts of interest. Despite these warnings, experts acknowledged that finfluencers help teach financial literacy to younger investors.

Why it is important: The rise of financial influencers on platforms like TikTok comes at a time when financial literacy in the U.S. is woefully low. A report from the Global Financial Literacy Excellence Center found that the average American scored just 48% on a financial literacy test, and only 16% would score between 75% and 100% in 2024.

Personal Finance Expert Suze Orman has also highlighted the problem, estimating that 95% of Americans struggle with financial literacy. This lack of knowledge makes the public more vulnerable to misinformation and potentially harmful financial advice from unverified sources.

The credibility of finfluencers has been questioned before. In 2023, the Indian social media finance personality Ravisutanjani Kumar was criticized for allegedly falsifying his educational credentials, which raised doubts about the authenticity of many online financial advisors.

Read more:

Image via Shutterstock

This story was created with Benzinga Neuro and edited by Kaustubh Bagalkote