The Dual-Edged Influence of Social Media in Financial Decisions

Abstract

This research investigates the impact of popularity-driven investments on financial stability, focusing on how social media influences investor behavior. With the growing prominence of influencers, social media platforms have fundamentally reshaped how individual investors and the general public make financial decisions. However, they also bring significant risks, such as reliance on trends driven by popularity and often unverified advice. A survey of 284 investors using a questionnaire was conducted, with 86% aged between 18 and 40, highlighting the widespread use of social media in shaping investment decisions, though the outcomes varied considerably. Also using Pearson and Spearman correlation analysis, this study explores the relationship between social media influence and the likelihood of experiencing financial losses. However, the correlation does not imply causation. The findings revealed the dual-edged impact of social media it raises concerns about its tendency to emphasize short-term gains, insufficient scrutiny of influencer advice, and the potential for suboptimal decision-making. This study emphasized the need for a balanced integration of social media into investment strategies, leveraging its advantages while minimizing the risks. Key recommendations include improving investor education to enhance financial literacy, promoting transparency to rebuild trust, and introducing regulatory frameworks to oversee the activities of financial influencers and their impact on markets.