Is Social Media Ruining Your Investments?

Is Social Media Ruining Your Investments?

Do you believe everything you read on Facebook or on Twitter?

I’m guessing the answer to that is no.

However, could you answer just as confidently to the question of whether you’re subconsciously affected by what you read on social media? Many decisions about money and life in general are affected by what the news (and social media) tell us.

While there is plenty of worthy data out there, sometimes people relate to this information in the wrong way. An idea is planted inside your head, making you feel the need to “do something.” The Facebook post you just read or the Tweet that sent you to some scaremongering article caused you to feel stressed and eventually led to a poor financial decision. For some reason, for many people doing something feels better than sitting tight.

Don’t get carried away

The very convincing and attractive Facebook meme that got you thinking and pulled you up short can confuse you completely. Instead of looking at each specific security and position that you own, you may find yourself obsessing all the time about your future in general and getting totally carried away.

It’s rather like the chess players who spend most of their time memorizing chess openings but get baffled when trying to apply what they learned. When playing in an important chess competition, players often mistakenly shift their concentration from checkmating their opponent to winning the whole tournament. Such contemplation distracts them from devoting their attention to their next move on the board. Though they may daydream about walking away with the trophy, they need to examine the pieces right in front of them. They must look at each situation on the board as a new problem to solve. If they can’t shake the feeling of, “I’ve got to win this game in order to qualify for my grandmaster title,” then they are likely to impair their concentration.

Stay within reason

Facebook posts, articles shared on Twitter, and social media in general can be interesting and inspiring. But they are not “one size fits all.” The advice that they give may be good for one investor but terrible for another. This is because too much information can lead to “information overload” – which you can read about here.

Leave social media for communicating with family and friends, rather than allowing it to guide you towards making bad financial decisions.

 

Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, avid chess fan, international investment advisor and Certified Financial Planner (CFP®)

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