Think Twice Before Trading Based on Social Media

Investors use a variety of sources to gather information to make investment decisions

 

These sources can include analyst estimates, news stories, various measures of market volatility, and other tools. Recently, some investors have started using a new source of information to help make investment decisions – “social sentiment” investing tools offered by financial services firms that seek to aggregate or analyze social media data from various sources (e.g., Twitter or Facebook). If you decide to use social sentiment investing tools as part of your investment research, please remember the following tips:

  • Do not rely solely on social sentiment investing tools to make investment decisions
  • Read all the disclosures, disclaimers, and background information provided by the tool
  • Know your time horizon for investing
  • Track the performance of any investment decisions made using the tool
  • Create and follow a long-term financial plan

 

Read more from the SEC about social media and investing

 

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