What we'll cover
Why doing research will make you less likely to be swayed by trends
Why you should have a good grasp of your financial plan
Why you should trust your gut when it comes to making a big financial decision
We all remember our high school years — a time of having fun and feeling free. On the other hand, you probably also recall the peer pressure you faced.
That feeling of wanting to fit in usually doesn’t end with graduation. Many adults are affected by peer pressure, especially when it comes to finances and investing.
But as we all know, doing what everyone else is doing rarely works in your favor.
So, how do you stay focused on your investing strategy when those around you — friends, family, even those you follow on social media — are hoping you follow their lead?
What’s behind meme stock investing
Our recent Become a Better Investor digital conference unpacked the impact online influences can have on your investment behavior.
Research shows that social media and digital apps that gamify investing have attracted more people to the market (especially young investors). It's true that gamification engages these new investors, but, when misused, it can also bring about negative behaviors, such as getting hooked on the highs you can experience when trading. But that kind of emotional investing may cause you to lose a portion of your investment — or worse, miss out on future gains.
Research shows that social media and digital apps that gamify investing have attracted more people to the market (especially young investors).
Panelist and Chief Behavioral Officer at Orion Dr. Daniel Crosby spoke about the psychology of investing and how social media investing trends (for instance, meme stocks) can guide people's money moves.
“Sometimes we lean on ‘attention-first’ tactics — we invest more in what’s loud, than what’s likely,” Crosby said, explaining how some people find it easier to gravitate toward meme stocks because they’re highly visible and have been endorsed by online influencers.
Mental health also plays a role in how the market has shifted due to emotions caused by the pandemic. Crosby shared that people, especially younger investors, are more stressed than ever before.
With only 22% of Millennials owning stocks and other investments, significant investment opportunities exist for this generation. But it’s important to understand how your investing mindset can affect your outcomes and how to prevent outside influences from overtaking your strategy.
Watch the full conversation, The Science Behind Social Investing.
Ground your investing mindset.
Being influenced by others' confidence isn't new in the investing world. After all, investor confidence is a prevalent metric often used to assess the market. It's not always the most accurate indicator of performance, but many people make investment decisions based on how other investors feel, often waiting for bolder investors to make moves before investing their own money.
It can be a bit daunting to determine how much of your investment attitude is yours and what comes from peer pressure that you’re not conscious of. Here are some strategies you can use to help keep your investment strategy focused on what’s best for your financial future, regardless of what’s trending online.
Do your own research.
It’s been found that interacting with your peers can significantly affect your investing choices. And the less you know, the more likely you are to be swayed by someone who seems like they do. To avoid this, start by researching stocks yourself.
Our investing tools and other digital investing tools can also help you gain a deeper understanding and measure market volatility.
Own your financial plan.
Only you know what’s right for your investment strategy. Think about your financial goals and what it’s going to take to achieve them. While certain aspects of your strategy might align with others, your money map will include unique directions that don’t align with your friends’ opinions and attitudes or what you see on social media.
Listen to your gut.
Have you ever believed in someone just because they were extremely confident? Even if your own experience tells you something might not work, it's tempting to listen to someone who has a tremendous amount of certainty. Don’t silence your own voice when people are jumping on certain hot investments.
Resilient in your resistance
Following the crowd can make you feel a part of something fun, especially when it comes to social media trends. But when it comes to investing, doing so can also lead you down a losing path — or, at least, a path that's not your own. Resist peer pressure when it comes to your portfolio, and you’ll have a better opportunity to keep your outcomes aligned with your financial goals.
