A study by the Canadian Investment Regulatory Organization (CIRO), finds community and social relationships are important to do-it-yourself investors (DIY) – both online and offline – when it comes to getting started with DIY investing and in making investment decisions. It also found that DIY investors are using social media as one tool among many to research and verify their investment decisions.
The Social Side of Investing – going DIY, but not going it alone
Many interviewees described the important role of friends, family or colleagues in getting them started with DIY investing. Many reported having received recommendations to use an app, receiving a demo or being advised to make specific investments from people in their network.
The study also looked at the role of social media in DIY investing. The research found that while many DIY investors use social media to find investment opportunities, they also try to be diligent by validating investment information they hear online by cross-checking it offline with friends and family.
“While it is concerning that many DIY investors are relying on social media and finfluencers for investment information, it is good news that they know to verify and validate what they hear across multiple channels,” said Alexandra Williams, Senior-Vice President Strategy, Innovation and Stakeholder Protection. “But caution is required when dealing with unregulated advice which is neither tailored to the individual investor nor regulated in terms of the product being promoted. Sound investment decisions require a consideration of both the client and the product.”
Beyond Control and Fees-New Motivations for DIY
Having personal control remained a primary motivator for DIY investors, control had different meanings for different respondents.
The study uncovered three interconnected categories of motivation for DIY investors.
Financial motivation led DIY investors to believe they could achieve higher returns than they would with an advisor, pay lower fees, or purchase investment products that may not be available through one advisor alone. These findings are consistent with much of the existing research.
But two surprising new areas of motivation emerged in the interviews. Instrumental motivations include non-financial benefits of DIY investing such as building financial literacy, the pursuit of knowledge and continuous learning, convenience and ease of use as well as the opportunity to connect with friends and family over investing. Identity motivations include feeling like someone who takes personal responsibility for their finances, is independent, and can feel fully responsible for their successes and failures.
“Being an investor is an identity in and of itself,” said Williams. “Investing gives people a strong sense of confidence and personal satisfaction. DIY Investors feel like they are taking responsibility for their investments and DIY investing is one way for them to feel like they are in the driver’s seat of their own life.”
Interviewees report using social media for investing primarily to seek personal finance and investment knowledge (such as money management, budgeting, debt reduction) learn investing strategies and track financial trends, while occasionally coming across ads for investment platforms. They report enjoying using social media in their investing journey—it lets them connect with other investors, share experiences, engage in valuable discussions and lighthearted banter, and stay motivated to continue investing. DIY Investors also used social media for purchase decisions—to learn about new products; monitor news, analysis or activity on investments they own; and to do additional research or validate what they had heard about a product from another source.
The research report gathers qualitative findings from a series of in-depth one-on-one interviews conducted by Innovative Research Group.
For more information, DIY Investing: New Investors and the role of social media.
