Do Online Communities Add Value To Your Investment Decisions?
If you want proper investment ideas, speak to a financial advisor. This sage advice, however, leaves many questions unanswered. How do you find good advisors? Will they have all the answers that you need? Can you afford an advisor?
Investors have often turned to online communities to find answers to these and other questions. In this piece, we look at whether some of these established and emerging online communities add value to your investing decisions.
“Dedicated investment communities are the next stage of evolution in social media around investing. Social media such as Twitter, Facebook or Instagram are generic – used to discuss all kinds of subjects without flows specifically designed for investing,” said Mihir Patki, co-founder of Multipie, one of the new online communities. “The second problem is that of fake profiles, screenshots and random gyan (wisdom) without context. Multipie is solving for this by keeping portfolios authentic through integrations with broker partners,” he added. Essentially, the users’ holdings will be sourced from their brokers with their consent rather than a self-declaration.
“Privacy of all users is maintained—absolute numbers are not shown by us, only asset allocation and top holdings are shown, just like you would discuss your portfolio with friends in real life”, said Patki. “Launched in October, 2021, our user base of more than 100,000 is purely organic. The quality of engagement on Multipie and the average portfolio size of ₹50 lakh are far better metrics than mere numbers of millions of inorganically acquired users who cant contribute to the community. We are not chasing user growth for the sake of it,” Patki added.
Then there is Valuepickr, a stocks-related discussion forum that was launched in 2010. The forum has threads on stocks running back for years, allowing readers to see how the discourse around a stock has evolved. Since the platform is free, it avoids bells and whistles that profit-oriented businesses use to keep users engaged. Its focus is on fundamental analysis of stocks, generally in the small cap space that the large institutions have not discovered. It also has a community that actively moderates content. “Any day trading targets or short term behaviour is discouraged by the community,” said Donald Francis, its co founder. “ In addition, Valuepickr has a section in which only ‘collaborators’ can post. This is a group of around 30 people who have been vetted by the platform founders. Based on the quality and frequency of posts, we admit 3-4 new collaborators each year and roughly the same number are removed,” he added.
Finance has traditionally been dominated by men, but there are women-only communities as well. Priti Rathi Gupta set up LXME, one such community in 2019 as a Facebook group. “It was a closed group and our idea was to develop a safe space where women could talk about investments. Women didn’t know where to have money conversations. Nobody was talking about it at home or among friends, and advisors are generally men and so there was a disconnect. The group has now grown to 30,000 women and 60% of them engage with it on a daily basis,” she said.
LXME also has an app with around 40,000 users, according to Rathi Gupta. The platform focuses on financial education and then allows women to invest through it (LXME is a mutual fund distributor, an entity separate from Anand Rathi which is itself a large mutual fund distribution firm).
According to Rathi Gupta, the community element is important, particularly for women, especially those who are not high net worth individuals. For such women, advice is not readily available. “If we find people posting things that are not appropriate, for instance promoting some unknown cryptocurrency, then we do comment on it putting forth our view. That’s how we moderate the platform, but we don’t delete any posts. Many women advisors are part of the LXME. We don’t, however, permit direct solicitation of clients,” said Rathi Gupta.
Even as investment-themed communities have risen, it is important to ask how each such group makes its money. Multipie, for instance, offers products like NCDs and corporate FDs to users and earns commissions from them. It will soon start charging brokers for integrating the platform into their websites. LXME is currently free, but users who invest through its app have to pay commissions (it is a mutual fund distributor). Valuepickr is free and that accounts for its bare bones interface, but you must be wary about community members who are posting merely to solicit clients.
In the past, online investing forums have come into the limelight for the wrong reasons. Examples abound about scamsters using them for pump- and-dump schemes. The surge in meme stocks such as Gamestop and AMC in the US triggered by discussions on Reddit underlines this. However, the right kind of forum, used in the right way can provide you with good information. These should at best supplement your own research, if you are a do-it-yourself investor or supplement the advice given by a qualified professional .