Five ways social media can help your investing
Whether you use it to keep in touch with your friends, follow the latest celebrity gossip or to keep up-to-date with the news, there's no denying that social media has revolutionised the way we communicate and access information.
In less than five years social media such as blogs, Facebook and Twitter, have become the norm. Facebook now has a staggering 600 million users worldwide – just under 10 per cent of the world's population – and close to 200 million users tweet their daily musings, from what they had for breakfast to how to make your first million.
Not only can these tools be great for your social life, they can also bring a whole new dimension to your investing. Here are five reasons why:
- The possibilities are infinite. They plug you into a global network of information, opinion and commentary generated by a myriad of sources, from well-respected business gurus and research analysts, through to private investors pulling together their first portfolios. Plus, you can share ideas, experiences, tips and advice with like-minded people through investing forums and bulletin boards. Examples include Motley Fool's Discussion Boards (www.fool.co.uk) and London South East's Share Chat (www.lse.co.uk).
- They don't have to cost a penny. Plenty of investment blogs are free and there's no charge for Twitter feeds so you can follow as many as you like without putting your hand in your pocket.
- You can make it personal. Because you can pick and choose what you read, you can build a feed to suit your taste and investment strategy. For example, if you're new to investing in the stock market you might want to follow just a few companies and a couple of commentators to get a feel for it. And with with free RSS feed readers and news aggregators you can see all the latest updates in one place, saving you having to visit all of the individual sites.
- They keep you ahead of the information curve. As well as giving you access to all these views, another key advantage of social media is immediacy. Rather than wait for tomorrow's newspaper, information is delivered in real-time. This can be essential if you're looking to maximise return on a share as you can invest at the beginning of the price rise, or get out before it has dropped too far.
- You can get under the skin of the companies you invest in. Many of the companies you invest in have their own twitter feeds and corporate blogs. Although many of these are promotional tools, some give you additional insights. A good example of this is Tesco's US subsidiary Fresh & Easy. When its marketing director blogged that the group's store roll out would slow down back in 2008, jittery investors reacted by selling their shares.
Remember, it's opinion, not advice
Even when it's from a trusted source, there's no guarantee what you read will improve your finances. Don't forget that the information in blogs, forums or Twitter feeds is opinion rather than advice, so always combine these 'tips' with a healthy dose of your own research to support your investment decisions.
While there are many benefits to be gained from using these sources of information, you should tread carefully. The information may not always be intended to make you richer. 'Share ramping' is a practice where someone buys a share then pushes the price up by encouraging others to invest. As soon as the price increases, they will sell and the price will fall back again. One of the older forms of social media, the bulletin board, is where this type of activity occurs most, so be careful when you're trawling through the share tips.
Investor blogs and tweets
Whether you're new to social media or you were in there from the beginning, the following blogs and Twitter feeds make interesting reading.
Follow Holly Cook, the editor of Morningstar.co.uk for regular updates on the stock market and the latest company news. Her tweets also contain plenty of links to tools and features on the website that will help you get the most from your investments.
Chronic Investor Blog
Described as bringing you 'gossip, rumours, greed, fraud and incompetence as well as anything investment related', this blog is packed full of titbits to entertain and inform your investment decisions. Recent postings have included investing ethically and considering whether diamonds make a good investment. Lively comments from readers add an extra dimension to this blog.
The Motley Fool
Designed to 'educate, amuse and enrich', this Twitter feed strikes the balance between entertaining and informative. As well as regular updates from the market and the latest company news, there's plenty of information about how to get the most from your investment strategy.