Why is Reddit so anti-Chinese

Should You Follow Financial Tips on Reddit?

There could be a lot more to come r / wallstreetbets, a popular forum on the Reddit social media platform. It became known to a wider public when its users recently drove stock prices soaring and then crashing.

On Tuesday, the buying campaigns launched by Reddit users seemed to run out of steam, and the middle of the week didn't turn the trend around either. Forward transactions on silver fell five percent and then remained stable, shares in the video game retailer Gamestop initially fell by more than 70 percent, but rose slightly on Thursday.

The silver price climbed more than ten percent on Monday to its highest level in eight years after users of r / wallstreetbets declared the precious metal to be the new investment objective. The hobby investors had previously agreed to buy massive amounts of Gamestop shares with a trading app called RobinHood. They drove up the price with the aim of damaging large hedge funds that had bet that the share price would fall.

When it came to the supposedly undervalued silver after Gamestop, some users also suspected that the tip was just an attempt to manipulate the markets. Others believed a hedge fund could be behind it. The course correction has now begun in the financial markets - the question is whether this also applies to the financial forums on Reddit.

"Ask us anything"

The on r / wallstreetbets Agreed purchase campaigns not only brought international attention to the forum, but also five million new users. But there are numerous other forums on Reddit, all of which deal with economics and finance, the list of the particularly high-growth "subreddits" in this category alone comprises 70 entries.

Some of these communities are dedicated to long-term financial planning. These include forums related to real estate buying, the FI / RE movement (Financial Independence / Retire Early), which aims to be able to retire as quickly as possible with enough money, or the counterpart "r / FIREd_and_Bored", a forum" for people who retired early or who gained financial independence and are now bored, "as the self-description says.

Then there are forums with short-term goals that are primarily about saving. Users of r / povertyfinance or r / almosthomeless seek advice here because they cannot afford dentures or can no longer live in their car. Some complain about their financial suffering, others give consolation or give tips on how the tide could perhaps be turned.

"You often see these posts from people who have made thousands or even millions of dollars with their investments," writes one user r / povertyfinance. "I would give a lot for someone who would have mercy and help me with the installments for my car and my house."

"It helps me when I remember little recent successes," writes another. "For example, if I was able to pay for my internet connection on time or a parking ticket. That's not much, but it helps me."

Protests on Wall Street: Some see the "Reddit Revolution" as a small investor uprising against the financial industry

The anti-Instagram

Reddit has been less in the public eye and less criticized than Facebook and Twitter, especially since it cracked down on extremist content for which it was previously known. But since last week everyone has been looking at Reddit.

"Reddit is online, but it reflects the rest of the world. These are real people with real interests," says Christine Lagorio-Chafkin of the US business magazine Inc. Her book "We are the nerds"is a kind of Reddit biography." The birth and turbulent life of Reddit, the cultural laboratory of the Internet, "is the translation of the subtitle of the title, which is not yet available in German.

The users of r / wallstreetbets "They're just interested in occasional day trading," she told DW. She explains the sometimes brutal honesty of many posts with the fact that everyone on Reddit uses pseudonyms instead of real names.

"This allows users to be more open about private matters, such as relationships, mental health, and finances, even when things aren't going so well." It's different on Instagram or Facebook. "There everyone wants to portray themselves as a shiny, photo-shoped version of themselves. But on Reddit, they talk about their real problems."

Everything to do with finances

That would interest you r / personalfinance explain, a forum that deals with budget planning, saving, investing and the like and has more than 14 million subscribers. There are also numerous smaller offshoots whose content is aimed at specific countries and regions.

There is a forum for people in the European Unionr / eupersonalfinance, which deals, among other things, with financial hurdles that have to be overcome when moving from one EU country to another.

A few general questions keep popping up in all of these forums: I inherited some money - what should I do with it now? Is it better to save on buying a property or should I invest in stocks? I'm getting married - should I share a bank account with my partner? Some users break down their monthly expenses in detail and ask the others where they see need for optimization.

Swarm intelligence

It is not without risk to take financial advice from strangers. But it can be quite helpful, says Christine Laudenbach, Professor of Finance at the University of Bonn. "When I get 100 replies to my post, something often emerges that a lot of people say."

"A lot of people who are in a similar situation to me share their experiences with me. This exchange of experiences can sometimes be better than going to a consultant," Laudenbach told DW. "That has to do with diversification. One person may give me a bad tip. But here I automatically have a wide range."

This could be useful for people who cannot find financial advice in their social environment or who simply do not dare to ask. "That is also due to culture. In Germany you don't talk about money," says the specialist in behavioral economics. The anonymity on Reddit is helpful. "The people there are perhaps also so open-hearted because they don't even know who else they could discuss this with."

First viral, then forgotten?

In any case, the number of Germans who want to talk about money on Reddit is increasing. At r / finance, a forum for German-speaking countries founded in 2014, the number of users has doubled from 40,000 to 80,000 in the last three months. The soaring Bitcoin may also have played a part in this. But when the battle against the short sellers of Gamestop stocks began, the number of subscribers rose particularly sharply.

However, not all users are happy with the rapid growth of their communities. "Subreddits like r / wallstreetbets have changed permanently and I don't think the influx of new people is a good thing, "a user of several English-language forums told DW." I've been here for a few years and I feel that no one has long been an active participant remains with it. People change every five or six months, and the older ones just parrot what they heard here as newcomers. "

For most investors, it would be better anyway if they just let their investments rest, says finance professor Laudenbach. Day trading makes no sense if people want to build up a financial cushion or make provisions for their retirement.

But that doesn't mean that day trading can't be fun. "It's a very fine line. I think many in these forums know that this is a game with fire. It becomes dangerous when someone is involved who is not aware of it," said Laudenbach.

It is also possible that many simply lose interest before they do any major damage. "You could compare the lifespan of such developments with that of Internet memes," says Reddit expert Lagorio-Chafkin. "They pop up suddenly, go viral, and then fade away. After a while, people just get bored of it."

 

 

Adapted from the English by Andreas Becker.