My wife and I were out to dinner recently, and I couldn’t help but notice a couple nearby. Both of them spent the entire meal on their phones. They hardly spoke to one another. Just sat there, scrolling. It seems that everywhere you go, people are glued to their phones. Social media has completely changed the way that many people interact socially, get their news, and are entertained. Instagram, TikTok, and YouTube have created an entirely new form of entertainment referred to as short-form content. These are videos under 3 minutes that provide entertainment, education, or advertise a specific product of a social media content provider. The interesting thing is that there is content on any subject you can think of. If you like golf, there is endless entertainment from many content providers. If you like food, don’t get me started on the amount of people who are simply posting content of themselves eating in their cars (why is this entertainment ☹?).
What do we know about the effects of social media and investor behavior? I did some research on Co-Pilot which is one of many AI tools that exist. Co-pilot is the Microsoft-branded version. Most people are familiar with ChatGPT, which is a great option as well. Here’s what Co-Pilot said about this topic.
Yes, there’s growing evidence suggesting a link between social media–induced attention fragmentation and poor investor behavior, especially among retail investors. While TikTok isn’t always singled out, platforms with fast-paced, bite-sized content—like TikTok, Twitter, and Instagram—are part of a broader ecosystem that shapes cognitive habits and decision-making.
📉 Attention Span & Cognitive Impact
Studies show that social media platforms are designed to maximize engagement through:
- Algorithmic feeds that prioritize emotionally charged or sensational content
- Push notifications that interrupt focus and encourage compulsive checking
- Infinite scroll and gamification that reduce deliberate content consumption
These features contribute to what researchers call “continuous partial attention”, a state where users are constantly distracted and less capable of deep focus or long-term planning.
💸 Investor Behavior & Social Media Influence
Research has found several behavioral patterns among investors linked to social media exposure:
- Investor herding: Users tend to follow crowd sentiment, especially when exposed to viral posts or trending stocks.
- Overreaction to surprises: Investors influenced by social media are more likely to react irrationally to news or earnings reports.
- Salience bias: Retail investors often chase stocks with flashy headlines or recent spikes, ignoring fundamentals. This leads to overvaluation and poor long-term returns.
- Attention-driven trading: A study analyzing millions of posts on platforms like Stocktwits and Twitter found that high investor attention (not necessarily positive sentiment) correlates with lower future returns, suggesting impulsive or hype-driven trading behavior.
🧠 The Bottom Line
While causation is complex, the data points to a strong correlation: shortened attention spans and emotionally reactive behavior—fueled by social media—can impair investment decisions. This is especially true for retail investors who rely on fast, surface-level information rather than deep analysis.
As a financial advisor and portfolio manager, I find this fascinating. In my career, I have noticed a direct correlation between enhanced technology and the potential for investors to panic. The fast, easy access to information that we have in today’s technological age can cause investors to overthink their decisions. I remember early in my career when online access was first introduced. Before that time, most clients received a quarterly statement (sometimes monthly but more often quarterly). That meant that the average investor was only being updated on the status of their investments four times per year. The benefit of that type of information flow was that investments had more time to ebb and flow before the client was given an update of their portfolio. Sure, there could be volatility within that timeframe, but by the time the statement reached the client, it’s much more likely that the volatility had smoothed out, thus avoiding a period of panic. It forced clients to take a long-term approach as opposed to having a short-term outlook.
With information available in seconds from your phone, it can sometimes cause people to spend too much time focusing on the headlines of the day and not enough time focused on the fundamentals of their portfolio. No one likes to see their portfolio move in a negative direction, but when volatility rears its ugly head, we need to have a long-term outlook and remember that if we are well diversified and invested in good quality companies, we can ignore the short-term noise and focus on the big picture.
To tie in my earlier thoughts about social media, I have to mention some of the content that’s popping up in the world of investing and financial planning. I have come across many social media influencers who profess to be financial experts. Investment advice, tax advice, etc. is provided with no proof as to the qualifications of the person posting the content. Their topics talk about how to save money on taxes by purchasing $200,000 SUVs, day trading, and buying real estate. The typical get rich quick or too good to be true type of information. This is a huge concern, especially for the younger generation that really does trust a lot of what they see online. If you ask me, WATCHER BEWARE. Always fact-check this type of information before acting on any unsolicited internet advice. In my experience, if it’s too good to be true, it probably is. There is no magic pill in the world of investing. It’s just common sense, diversification, and time.
If you have questions about your portfolio, how you are currently invested, or just want to schedule time for a quick check-up, please get in touch with us. We would love to speak to you.
