Online investors say forum culture is misunderstood

Step into the online groups known as subreddits and it’s easy to see how many young investors are finding a place to belong.

From sound advice on debt repayment and diversification to a meteoric onslaught of stock symbols, exclamation marks and memes, the range of subreddits available ensures that an investor in will find someone who speaks his language.

Online platforms such as Reddit, Twitter and Discord have swelled in recent years as watering holes for the personal finance, cryptocurrency and investing communities, driven by the growing accessibility to commerce, pandemic economies and, within some groups, an irreverent outsider attitude imbued with self-effacing irony. .

Considered by some to be the Wild West, one thing is clear: these groups influence the financial decisions of young investors. Today, more than half of 18-34 year olds get stock trading advice from social media sites such as Reddit, compared to just 4% of investors aged 55-64, according to research from the trading firm. Hargreaves Lansdown financial services. APIs. The Reddit forum r/wallstreetbets, is now followed by more than 10 million users.

Financial information shared over the Internet should, of course, always be treated with caution. And let’s face it, some of these platforms have become easy targets for ridicule. But insiders say behind the derision lies a misunderstanding of a new kind of internet culture, where young people are forming communities and identity alongside their financial decisions.

That culture has accelerated as the pandemic has exposed the divide between the wealthy and the average investor, said Dave Lauer, an Ottawa-based financial executive whose frequent Twitter analyzes of the economy and stocks of memes have attracted over 100,000 subscribers.

“A lot of people have gone through hardship over the last few years, and they’ve seen a lot of wealthy people not going through that hardship,” Lauer said. “People often don’t know how this coincided with COVID, and how, in a time of great stress, people looked for community and support, and they found it here.”

Last year, in what has since been described as a protest against institutional short sellers, Reddit groups such as r/wallstreetbets gained notoriety for sparking price spikes at unlikely companies such as retailer d electronics GameStop Corp., movie theater chain AMC Entertainment Holdings Inc., and BlackBerry Ltd. Early buyers claimed they saw true value in these features of a bygone era. Later, investors crowded in to ride the rising wave.

A Canadian version appeared, r/baystreetbets, with 42,800 members conversing under the image of a beaver with slicked back hair and sunglasses. The band’s satirical catchphrase is a quote from television character Michael Scott in Office“You’ll get rich quick.” We all will!

Simultaneously, the growth of cryptocurrency technology has led to an increase in newsgroups, with topics ranging from specific crypto price movements to regulatory news. Posts and comments about crypto quickly overtook those mentioning investing, which have also increased since the start of the pandemic.

Since then, Reddit groups have become home to custom charts of individual investors celebrating gains and losses on investments, some swinging hundreds of thousands of dollars back and forth. In March, an investor shared what he claimed was the result of his investments in a post on r/wallstreetbets: a graph showing an investment in GameStop worth $1.3 million, versus an initial purchase of $300,000. A few weeks earlier, another investor had posted on the same forum with the sullen admission: “200k to 9k. I lost all the money my grandma gave me before she died.

Mr. Lauer agreed that some investors take greater risks than they should, but stressed that the groups are valuable for hosting participatory research that otherwise would not be possible.

“They are hungry for knowledge,” Lauer said. “I really like seeing what the hive mind finds. I think they’ve found all kinds of things that wouldn’t have been found otherwise.

But others say this culture, which encourages trade and speculative investment, is the kind of behavior young Canadians should be wary of. “It’s great to get your motivation and inspiration from social media, but my God, don’t just buy the stocks that people are talking about,” said millennial financial blogger Jessica Moorhouse, who is followed by its investment strategies in index funds.

Moreover, these groups are not inviting for everyone. Ms Moorhouse said many felt like an “old boys’ club”, with online posts frequently using derogatory language, sexist or homophobic slurs. Additionally, the chat functionality of these groups creates an environment that, for a stranger who is unfamiliar with the terminology of the group, is overwhelming.

But other online communities have developed a completely different kind of culture, which other personal finance influencers say actually provides valuable advice.

Some groups, such as r/PersonalFinanceCanada, followed by more than 800,000 Reddit users, actually ban specific investment recommendations, instead encouraging users to consider a broader investment strategy as part of a number tools for financial well-being.

On r/CanadianInvestor, three of the 10 most popular posts of the last year are related to real estate, exchange-traded funds and guaranteed investment certificates. “Where to safely park 100k and let it grow?” a user asked in typical early April. “I’m looking for somewhere not too risky and moderately liquid to put it and forget it until I need a deposit.”

Yet despite the different approach to investing, these more conservative communities have developed an equally strong culture: one that scoffs at speculation and, as some members joke, demands eating lentils and going without car.

Regardless of investment approach – whether speculative or conservative – social media users should be aware that the advice given online may not be relevant to their circumstances. While users search for groups that match their interests, these communities often lean toward the more financially savvy — and those with more money.

Surveys completed by thousands of users on the r/FIRE or “Financial Independence, Retire Early” subreddit – a lifestyle that encourages frugality and extreme savings – showed the majority were in the 90th percentile of the wealth of their country and had a net worth of over $100,000.

Because online groups attract those who are on board with this approach to investing, users will often come across only one philosophy, which may not suit their circumstances. Understandably, financial advisers are wary of these platforms, where users are mostly anonymous and their motives unknown.

“I think like any source of information on the internet, what we’ve all learned is that you may not be getting the right information or the complete picture,” said Mark Slater, senior adviser on wealth management at CIBC Wood Gundy. “So my advice would be, beware and do your research on this information, and possibly confirm it with someone who knows about this stuff.”

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