The rise of finance TikTok.
Enter, Tik Tok.
No matter how you feel about the app, it has become a global phenomenon with over 800 MILLION users. Everyone except the most stubborn haters broke down and downloaded it sometime in March. COVID still has us on lockdown here in California and if you’re anything like me, you’ve been spending your quarantine daze watching Tik Toks.
I’m a finance nerd, so it took me about 10 minutes to make it to “finance tik tok”. With a captive audience, everyone from financial advisors to hedge fund managers to teenagers are teaching people about personal finance and investing. The crazy thing is, finance tik tok is actually responsible for moving the stock market.
Everyone’s a day trader now
Alongside the explosion of Tik Tok, we’re also seeing Robinhood taking off. Robinhood is a trading app that allows people to invest with as little as $5. Combine a cheap trading app and Tik Tok influencers, and you have millions of people watching “trading gurus” and learning how to trade stocks.
At some point back in early June, a few of these gurus saw that Hertz stock, the car rental company, had fallen significantly from its normal price. They picked up the stock and pushed the idea out on Tik Tok. In just 3 days, Hertz stock had risen a whopping 574%! The ability to move markets like this is usually reserved for big hedge funds with billions of dollars under management, but the combined power of a few million investors had the same effect!
Buyer beware
The news isn’t all positive (are you really surprised?). The Tik Tok investing gurus missed a crucial piece of information: Hertz is going out of business. In the two weeks after the stock pop, the price came back down to its original level. Any investors who got in late lost almost 98% of their investment.
The silver lining
Hertz was an extreme example. The reason I’m talking about this at all is because Tik Tok has become another fountain of knowledge for individuals. You just have to consider the risks and don’t let yourself be misled!
The reason I care is because this phenomenon reinforces the fact that financial education should be free. The idea of paying a financial planner $1,500 to build you a “comprehensive financial plan” is pretty much dead. Don’t get me wrong, there is still value for complicated scenarios, but most of the information you need is just a Google search away.
If you don’t have the knowledge, don’t pay for it. Go find it first.
If you can’t find it, shoot me an email on our website. I’ll give you an answer for free and if I can’t, I’ll find someone who can.
Hope you learned something.
Warm regards,
Nate Hoskin