TikTok for trading tips? Millennials and Generation Z find their investment muse

Alex Rawi Ruto is a 16-year-old high school student in Depok city, just outside the Indonesian capital of Jakarta, who started investing in mutual funds this year after squirrelling away part of his 100,000 rupiah (US$7) monthly allowance.

He has since invested 600,000 rupiah into several mutual funds through Indonesia-based robo-adviser investment platform Bibit, from which he has earned 34,000 rupiah, and he is planning to turn his sights to investing mainly in individual stocks, although not until he turns 17.

"I'm still studying and learning more about them," he said about stocks, adding that his ultimate goal is to ensure a stream of passive income to someday become financially independent.

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Peter Yong, the founder of Mr Money TV, uses TikTok to educate his viewers on the basics of finance. Photo: Handout alt=Peter Yong, the founder of Mr Money TV, uses TikTok to educate his viewers on the basics of finance. Photo: Handout

To achieve this ambition, he has turned to social media platform TikTok, where financial investment guidance abounds. His TikTok feed is filled with self-declared finance "gurus", all sharing a myriad of information - from taking investment-related questions from viewers to daily market analyses - all via short videos lasting under 60 seconds.

TikTok started out as a platform for generation Z and millennials to share lip-synching videos and memes, but its videos carrying an investing hashtag have drawn over 1.06 billion views, while videos with the finance hashtag have around 1.1 billion views.

Many of the so-called gurus who use the platform once stuck solely to Instagram and YouTube to share content, but they have found a willing audience on TikTok in the army of digitally savvy retail investors who see the coronavirus pandemic and working from home as an opportunity to trade in mutual funds, stocks, real estate funds (REITs) and exchange-traded funds (ETFs).

A study conducted by the Xiaomi-backed global brokerage firm Tiger Broker found that 35 per cent of generation Z from across the globe are investing in REITs and ETFs, while 45 per cent prefer to invest in blue-chip stocks like Apple, Boeing and Carnival.

To ride the wave of interest and bring in new retail clients, many brokerages online have begun offering various incentives. The mobile app-based brokerage Robinhood, for example, is offering customers both free trades and a $0 minimum balance - an attractive feature for younger investors.

Samuel Rhee, chief investment officer at financial advisory firm Endowus, which is based in Singapore, said lower charges have made investing more accessible, and are a major draw for millennials like Ruto to start investing.

"The convenience and gamification of investing by these internet brokerage platforms are the real factors spurring millennials to start trying to trade and invest," he said. "There is a trend towards 'do-it-yourself' and individual investing, [but] there is also a major shift away from individual investing or stock picking toward passive investing and institutionalisation - essentially, leaving it to the pros," with people moving between the two extremes.

Internet brokerage platforms like Tiger Broker, which has a client base largely made up of investors from Singapore, Indonesia and Malaysia, doubled the number of new accounts it opened from March to April this year, with 65 per cent of the new customers consisting of millennials. Some platforms, like eToro, allow top traders to broadcast and share their investment strategies and ideas with others, making the investment process seem less intimidating. Other apps use graphics, such as confetti bursting after completing a trade.

Ang Swee Hoon, an associate professor at National University Singapore Business School, said that as more millennials become interested in investing, some social media influencers have turned their attention to catering to them.

But the boom in online financial gurus has caused concern. Malaysia's Securities Commission this week issued a statement on what constitutes legal and licensed investment advice, adding that unlicensed finance and investment gurus are taking advantage of inexperienced investors.

The Covid-19 pandemic is the first major financial crisis for younger millennials and generation Z, and it has served as a wake-up call for many of them to learn about investing and making their money last.

Peter Yong, founder of Mr Money TV, which is one of the first financial education channels in Malaysia, said: "Many have lost their jobs and the opportunity to do more than what they plan to do - moving to another country, furthering studies, travelling and ultimately, surviving. This then got their attention on wanting to do more financially, so that they can continue doing what they love doing and to sustain basic needs."

Yong has over 36,600 subscribers on YouTube and 5,000 followers on Instagram, and set up his TikTok account just a month ago.

Yong said that he receives many questions about government investing programmes and how internet brokerage platforms like eToro actually work.

"Many are still trying to figure out various ways to go about this as security is generally the main concern," he said. "Many have also realised that saving money has been taught; however, investing was something one has to figure out themselves - and we're here to help them out in that part, while making financial education fun and easily understood."

"I find that my most popular videos tend to be the more basic and straightforward ones like 'Why You Should Not Keep Money In The Bank'," Nigel Ng said. alt="I find that my most popular videos tend to be the more basic and straightforward ones like 'Why You Should Not Keep Money In The Bank'," Nigel Ng said.

Malaysian personal finance blogger Chin Yi Xuan, 26, created a TikTok account in September, after he saw the platform's rapid rise in popularity among younger millennials and generation Z.

"I want to experiment with posting finance-related content on the platform," he said. "I know TikTok is trending and I'd like to explore the possibilities and understand the audience that is using TikTok."

Chin, who runs the blog No Money Lah, has since gained over 3,000 followers on TikTok and uses the platform to answer questions on topics like robo-advisers and dividends.

Others hope to use their social media reach to educate youths about financial literacy and have realised that TikTok's short-form video clips appealed to the younger generation.

"Before that I was only posting investing-related content over on Instagram with the goal of promoting financial literacy for the younger generation," said Nigel Ng, a 21-year-old undergraduate majoring in business at National University of Singapore. "I find that my most popular videos tend to be the more basic and straightforward ones like 'What Is A Stock?' or 'Why You Should Not Keep Money In The Bank'."

However, academics and experts warned that younger investors should take the information they get from non-professional online financial advisers with a pinch of salt.

"Having greater access to investment information appeals to the millennials because they live in a world where information is abundant online," said Ang, from NUS Business School. "What is needed is the ability to sieve through such information for the relevant ones."

Rhee, from Endowus, had his own advice for young investors trying to sort the wheat from the chaff of online financial advisers.

"The first litmus test is - if it sounds too good to be true, then it probably is. There are no easy short-cuts to making money through investing. There are time-tested truths that play out over time. It sometimes requires patience and a long-term perspective.

"Some level of scepticism and cautiousness are required, especially if they push for an easy way to make money or just short-term gains, or some type of guaranteed returns."

This article originally appeared on the South China Morning Post (SCMP).

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