It’s easy to understand why the vast majority of people love using social media as a means of finding stock tips. There are countless groups created specifically for this purpose including one Facebook group that at this moment in time has 37,000 members. 37,000!!
Now what do you think happens when 37,000 people converge in one group trying to find a stock worth investing in? do you think there are nuggets or hidden gems being shared to tens of thousands of people? Of course not.
Now I’m not throwing digs at Facebook or anything like that because it happens across all platforms. Even if you see me discussing a stock or perhaps purchasing it in my $50k challenge please do not buy it just because I have. I’ll give you the perfect example why.
I purchased CR1 in my $50k challenge in Aug 2019 and sold it in July 2020. During that period I managed to lock in a 67% profit. Just to confirm I didn’t lock in the 67% profit because I was happy with that return. I personally locked in this profit simply because management were steering the CR1 ship in a different direction that I didn’t agree with.
That doesn’t mean it was a wrong move by them, it just means it no longer fit within my strategy and risk reward. Now what’s important to note though is the volatility that occurred while I held it. The Largest drawdown was -54% and it also had 9 separate drawdowns of greater than -10%.
Now do you think you would have had the conviction to hold through all those drawdowns if you simply followed me or anyone else into a stock? Of course not because the only thing that allows you to hold during this period of volatility is conviction and belief in your stocks.
Let me tell you conviction is non-existent when you simply follow someone into a stock.
Is Social Media all bad?
Don’t get me wrong though social media provides tremendous opportunities for investors. The sharing of ideas, education and stock analysis cannot be ignored as speculative investors have access to more information than ever before.
The amount of highly experienced and successful speculative investors who willingly share their expertise to total strangers online has opened up the door to one of the greatest opportunities available to new speculative investors in the history of financial markets.
No longer do you need to sit alone in your room marking up a charting book or learn the basics of fundamental analysis. You can now talk directly to the author themselves as well as the thousands of people who have read through the same content you have. Opening the door to greater understanding and growth.
A prominent twitter poster called @Wealth_Theory sums the opportunity of social media up perfectly with his following tweet,
“Imagine a subscription service where you could interact and follow some of the brightest minds in the investing world. Now make it free. Now realize that’s what Twitter can be. Manage your feed appropriately and you have a more powerful resource than 99% of paid subscriptions.”
Now just because you shouldn’t use social media to find stocks, it doesn’t mean you shouldn’t use it at all. If used correctly, social media can be a fantastic place to help you learn and grow as an investor. Instead of looking for tips though, use it to find the following kind of people.
Firstly someone who has experienced what you have experienced and come out the other end. Let’s say for example you are going through an extremely difficult time after experiencing a huge loss in your portfolio. Find someone on social media who publicly discussing their investment losses and how they dealt with them.
You will be amazed at how much confidence a little bit of hope can bring you. If you follow me on twitter you will know how many crazy mistakes I have made in my career because I talk about them all the time.
I don’t do it for the fun of it, I do it to show people that this guy exists out there somewhere in the world who has made the same mistakes as I have and has come out the other end.
The next type of person to follow is someone who has achieved what you want to achieve. I hope I don’t offend anyone by saying this but you don’t go to a broke financial planner and ask for investment advice, or an overweight nutritionist or personal trainer to ask for health advice.
In the same way, you don’t want to learn off someone on social media who hasn’t already achieved what you want to achieve. Twitter for example is filled with amazing investors to follow, not for their stock tips, but for their knowledge on investing.
Penny Stock investing course:
I’ve taken my decade or so experience that I gained throughout my investing journey and created an online course called “Penny Stock Investing – The Basics”.
it’s been 1 month since I launched my course and to date it has been a hugely rewarding experience for me. Communicating with students, answering their questions and watching some of them grow in such a short period of time has been amazing.
My vision for this course is different from most online courses. I never designed it as a means of selling someone a digital product then never hearing from them again.
I truly want our penny stock school to grow into a vibrant community where we can help keep each other stay on track to implement the learnings that students have hopefully taken from the course.