The phenomenon of social media has extended into different economic sectors, including the investment community. Investors can capitalize on Internet tools such as blogging, interactive forums, and webcasts to give and receive real-time news updates on stocks and make new connections. Users can receive updates on the economy and financial markets through these online channels, which can influence trading in individual stocks. Investors should be cognizant of abuses that can occur through financial networking, just as abuses occur in other forms of social networking.
Common types of social media tools for investing can be found on many financial websites, as well as the more common social networking sites such as Facebook and Twitter. On these platforms, you can develop a connection with investment professionals or other investors to exchange investment ideas and trends that may lead to changes in your stock portfolio. In 2011, NewMarket Technology launched a series of webcasts detailing business plans of publicly traded technology companies in an attempt to connect with investors. The webcasts were linked to Facebook and Twitter.
Blogging, an informal online platform where opinions are expressed, is a popular social media tool. Bloggers are often individuals, but mainstream business news providers, including CNBC, publish financial blogs with stock charts and graphs that define investment ideas or trends. Blogs can provide links to other social networking websites, such as LinkedIn, a social media platform for business professionals, Facebook and Twitter. The retweet (re-posting) process on Twitter can lead to rapid distribution of an opinion or idea--stock tips, trends--and often generates additional information from other investment connections.
Proceed With Caution
According to CBS MoneyWatch, when musical performer 50 Cent touted the merits of a little-known stock on Twitter its value went up 270% in a few hours. The article revealed that the performer holds a majority stake in the stock. Even with that boost in revenue, however, the small company may never attain profitability. Be cautious about tips you find on social media -- the motives of some individuals might be to drive prices higher and subsequently sell shares at a profit.
Wealthy investors might turn to social media tools that are specifically designed for the affluent. According to a 2011 article in the "New York Times," high-end investors, for a price, can access social media networking platforms such as Family Bhive where wealthy investors share investment advice. This might not be for everyone, however. Many rich investors are not interested in taking advantage of online tools because of concerns about privacy. Once you're a part of a social media website you can lose that privacy, despite a different online name.
- New York Times: "Wealthy Turn to Social Media for Investment Help"; Matthew Saltmarsh; April 6, 2011
- CBS MoneyWatch: "50 Cent: Penny Stock Pump & Dump?"; Kathy Kristof; January 11, 2011
- Market Wire: "Five Innovative OTC Companies Use Facebook and Twitter to Build Better Shareholder and Investor Relationships"; January 7, 2011
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