Public figures have “collectively amassed hundreds of millions of followers online, “many of whom “take their comments on the market as gospel.” This according to a recent article in The Wall Street Journal.
Elon Musk, David Portnoy and the rapper Snoop Dogg are mentioned as a few of the new stock market influencers that are gaining huge followings. And while the notion of a market influencer is not new—older generations have been enamored with Bill Miller, Peter Lynch and Warren Buffett—the article says that many of today’s gurus “have appealed to their followers precisely because of their irreverence and disdain for financial-industry norms” with followers that often profess “they couldn’t care less about the depth of analysis behind a trade. If their icon is buying something, they will throw money at it, too.”
“Because of social media, it’s never been easier to become a promoter,” according to Ben Carlson of Ritholtz Wealth Management. “It doesn’t matter what your investment skills are.”
While one benefit of the rise of social media influencers has been that is has stirred up interest in investing among younger people “who otherwise may not have made the jump into the market,” the article notes that bets on individual stocks “can backfire quickly.” It notes, “There is a danger in big personalities online wielding the influence they do over individual investors.” Example: GameStop soared to $347 a share at the end of January before taking into the $40s a few weeks later.
While “a billionaire may be able to laugh off the losses,” the article notes, “for the average individual, one wrong bet could have far more punishing consequences.”