Wednesday 22 September 2021 10:59 am

Exclusive: Chatrooms and Reddit groups increasingly drive traders' decisions

Chatrooms and social media groups are increasingly driving UK traders’ investment decisions, according to new data that was exclusively shared with City A.M. today.

UK investors are catching the investment chatroom bug with nearly one in ten regular traders using chatrooms to research ideas, ETP provider GraniteShares has found.

Subreddits such as WallStreetBets are increasingly used and are among a of chatrooms, some of which charge subscriptions and have moderators while others are free and do not have moderators checking content.

Around 1.69m share investors in the UK who trade regularly are now members of chatrooms, relying on them for ideas on stocks and ETPs to buy and sell, the firm found.

Younger investors are more likely to be chatroom members with 28 per cent of under-25s saying they are members and 17 per cent of those aged 25 to 34. By contrast, no over-55s say they are members of chatrooms.

Chatrooms

The average chatroom member in the UK spends four-and-a-half hours a week in chatrooms, with some indicating they spend up to 20 hours a week discussing shares and looking for tips.

By comparison, the average person in the UK spends an hour and 49 minutes a day on social media.

Some users of chatrooms such as WallStreetBets have claimed they’re using student loans to invest, although the research found most traders are using money from their cash savings.

Its research found 55 per cent regular share traders are using their cash savings to fund some of their share buying while 37 per cent are funding their trading out of their salary.

Just one in 12 are using credit cards while 8 per cent admit they have dipped into savings set aside for a big event such as a wedding. Around 5 per cent are funding trading with benefits.

“Investment chat rooms have become famous because of WallStreetBets, and the meme stock phenomenon.  It is interesting to see so many chatroom users in the UK,” commented Will Rhind, founder and CEO at GraniteShares.

“The growing interest in share trading during the Covid-19 pandemic has meant more people trading more regularly,” he told City A.M. today.

Many users find that chatrooms can be a good source of support and advice for members, although Rhind stressed this approach does carry risks.

“The risk however is that people rely too much on information appearing in chatrooms and don’t do their homework properly by understanding the product or stock they’re buying,” he concluded.

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