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Getting Nudged

Jim Wasserman, 1:06 pm ET

INFLUENCERS ARE people who use their popularity and social media presence to nudge our decision-making, especially our spending choices. They’re a powerful force in today’s marketing world, particularly with younger consumers looking for cues as to what’s hot.

In one survey, 60% of those ages 16 to 24 credited influencers with purchases they’d made in the past six months, more than any other age group. Combined with the bandwagon effect and FOMO, or fear of missing out, an influencer’s nudge can create a stampede for a product or service, one that’s based less on rational decision-making and more on blindly following the hot lead or leader.

But before we start clucking our tongues at the folly of youth, we should ask ourselves: Do we ever outgrow our susceptibility to being influenced by a cult of personality or a fear of missing out? We oldsters may be more wary and more sophisticated in our decision-making, but we remain open to being nudged.

I hear many people say they almost always listen to advice from Suze Orman, Jim Cramer or the Motley Fools. The followers will tell you about these influencers’ successful track record or previous examples of good advice. But they’ll also tell you they like the personalities or the delivery—to the point where they often accept pronouncements without further consideration or research. It may or may not be good advice. But it was sold based on a smile, a personality and name recognition.

Of course, some influencers do know their stuff and their opinions should be considered. Others, however, have a stake in the game. Many influencers focused on the teenager market get paid to push certain products or simply to use them. In the grownup consumer world, thanks to social media, pump-and-dump  stock schemes are growing faster than the SEC can shut them down (though some have been held to account). Pump-and-dump is also spreading through the cryptocurrency world.

Do your research. Don’t just buy the hype from the guru. Read “this is fantastic” messages in the comments section with a wary eye. Remember, friends smile, but so do crocodiles.

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Ormode
Ormode
1 month ago

Jack Bogle, anyone? The biggest influencer ever.

Philip Stein
Philip Stein
1 month ago
Reply to  Ormode

Sooner or later, we all have to learn about investing by reading well-written books that have stood the test of time. An author who makes the effort to research and write a book using data and solid logic to reach conclusions, is a more worthy source of investment advice, in my opinion, than one who writes short blogs or offers off-the-cuff remarks in an internet forum, no matter how well-known they are.

I have a hard time considering John Bogle as an influencer in the same category as a Suze Orman or Jim Cramer. Bogle wrote extensively and tried to convince his readers using his research results, not the force of his personality. If you followed his line of reasoning and agreed with his conclusions, you might feel justified heeding his advice.

Bogle occupied a powerful perch as founder of the Vanguard Group, but I never felt he expected his readers to agree with him because of his stature in the investing world. In fact, in one of his books, I recall him frequently admonishing his readers with the phrase “But don’t take my word for it…”

By all means, be skeptical of influencers. Follow their reasoning (if it’s offered) and do your own investigation to determine if their conclusions are worthy of your consideration. I would also ask myself how or if an influencer has skin in the game. If their narratives fall short, do they suffer to the same degree as their followers?

Roboticus Aquarius
Roboticus Aquarius
1 month ago
Reply to  Ormode

… maybe, but certainly the best imho. He truly had investor’s well-being at heart, and literally passed up millions of dollars of income potential to follow his dream of providing the little guy with a fair shot at accumulating wealth.

Langston Holland
Langston Holland
1 month ago

Rats! Yet another obstacle to successful investing I don’t get to experience given my commitment to index funds. : )

Investopedia’s take on pump and dump.

Last edited 1 month ago by Langston Holland

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