Investors that listen to finfluencers, or trade crypto and meme stocks, are also more susceptible to investment fraud, according to new research from the FINRA Investor Education Foundation.
The investor education arm of the U.S. self-regulatory organization published an excerpt from its forthcoming triennial online survey of retail investors that examines their attitudes, knowledge and experience. The research will be published in December.
The excerpt released Tuesday looked at investors’ vulnerability to scams with a question about a hypothetical investment opportunity that carries common red flags of fraud — a scheme that promises high returns with no risk.
The survey found that meme stock investors are most vulnerable to these kinds of pitches, with 77% saying they would invest in the hypothetical investment — versus 45% of investors that haven’t bought into meme stocks.
Similarly, the study found that 65% of crypto investors are interested in the shady investment, compared with 44% of non-crypto investors. Of respondents that follow finfluencers’ advice, 72% said they would invest, as would 69% of those that rely on social media for investment information — compared with 42% of those who don’t use social media for investing.
Investors with weak knowledge about investing were also more vulnerable than savvy investors, with 49% of low-knowledge investors saying they would invest, compared with 36% of knowledgeable investors.
“These findings reveal that a concerning number of investors might be vulnerable to investment fraud,” said Gerri Walsh, president of the FINRA Foundation, in a release.
“All investments involve some level of risk, and investors must understand their own risk tolerance to make informed decisions. At the same time, investors must learn to spot the red flags of investment fraud — including the promise of little to no risk with unusually high returns,” she said.