TikTok ‘finfluencers’ predicted the AI rally, can you trust them?

Investing in equities can be a complex exercise, warranting specialized guidance. From where can one get that advice?

Some attempt to do their own research, poring over reams of financial indicators to identify potential winners, while others consult investment advisors and experts with years of experience in the market.

There are also people who look at the movement of celestial bodies or the earthly elements to determine where to put their cash.

And then there are those who turn to social media, scrolling through their feeds to seek out “financial influencers” or “finfluencers” to multiply their their money.

Let’s take a look at that last set of advisors — the “finfluencers” — as there popularity, especially among young investors, has been growing and could supersede that of traditional investment advisors.

The investment theme for the first half of 2024 was dominated by an outsized focus on the tech industry, especially on stocks that are a part of the artificial intelligence value chain.

Brokerage aggregator site BestBrokers analyzed the 20 most-watched stock-picking videos on TikTok from 2023, that recommended shares that could potentially surge in 2024.

The team then tracked the prices of the recommended stocks from the day the videos were posted up until June 21, 2024. It also calculated returns on a $1,000 investment in each stock or ETF recommended in these videos.

“Our findings show that over 64% of the 87 total stock predictions in these videos came out accurate, including the remarkable rallies of AI stocks such as Nvidia and Qualcomm,” the BestBrokers report from July said. About 36% of the recommendations resulted in losses.

The report said that a majority of the influencers had advised picking stable, blue-chip stocks such as Google, Nvidia and Amazon, something that traditional money experts also advise to people looking for less risky investments.

The most profit that an investor could have generated from a single stock would have been Nvidia, which grew 63.08% in the period surveyed. An investment of $1,000 in the stock would’ve grown to a substantial $1,630.79.

On the flip side, a $1,000 investment into the worst performing stock — New York-listed biotech company Ginkgo Bioworks Holdings — would have fetched a 74.74% loss.

What if one decided to cut the risk by not betting on a single name and, instead, diversified by purchasing all stocks recommended in a single video?

If a person invested $1,000 in every stock recommended in the one video that got the most bets right, the gains would have amounted to $4,860.

However, “[this] would require a $23,000 initial investment in 23 different…