Are activist investors piling into social media frenzies playing with fire?

Social media-led activist investors are playing a potentially costly game, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.


The warning from Nigel Green, the chief executive and founder of deVere Group, comes as the video games retailer published its first earnings report since it grabbed international attention during a Reddit-fuelled buying frenzy in January.


Both the gaming firm’s sales and profit figures were lower than many analysts had anticipated and its shares, which had dropped 6.5% during the day, briefly climbed 8% in after-hours trading before falling more than 15%.


Mr Green says: “This year has seen a surge in day-trading frenzies, triggered by so-called ‘activist investors’ on social media platforms and online forums urging others to invest their cash into populist bandwagons.


“They have tapped typically inexperienced, younger people who might not necessarily have the financial resources to be resilient against usually highly speculative and volatile investments.


“By being unaware of the high level of risk involved in these social media-led activist investment campaigns, people are playing a potentially very costly game.”


He continues: “Extreme caution should be exercised before joining stock frenzies of this nature.  The valuations can be expected to be wild – in both directions – and there’s a legitimate risk that novice investors could face a financial hit.


“To create, grow and safeguard wealth consistently to reach your long-term goals – which for most people is financial security and freedom – there’s no substitute for independent, professional, personal advice.”


At the height of the GameStop frenzy, Mr Green said: “Micro-bubble spotting, and diversification across asset class, sector, region and even currency, should become a priority for investors right now.

 

“As ever, investors should work alongside a good fund manager to seek out those stocks most likely to generate and top-up their wealth over the long-term.”


The deVere CEO concludes: “I would avoid piling into stocks pumped by social media influencers. 


“If you do want the thrill or novelty or chasing big gains, you really should ensure that you have a sound, diversified, long-term plan beforehand.


 “There’s a major difference between investing and gambling.”

Facebook
Twitter
LinkedIn
Reddit
Email

The deVere Group of Companies, is licensed in various jurisdictions, however, the products and services offered by the respective entities may vary per jurisdiction. The deVere Group does not warrant, either expressly or implied, the accuracy, timeliness, or appropriateness of the information contained on this website. The deVere Group disclaims any responsibility for content errors, omissions, infringing material and any responsibility associated with relying on the information provided on this website. For more country-specific products and services offered by the deVere Group of Companies, you may wish to visit the specific national deVere website, if and where available. The information contained in this website is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved and your country of residence. Before making any decision or taking any action, you should consult a deVere Group Financial Advisor.

© 2010 – 2022 deVere Group. All rights reserved.

© 2010 – 2022 deVere Group. All rights reserved.

Tell Me More