School’s Out, Investing For Your Future Is In

The SEC’s Office of Investor Education and Advocacy and the Financial Industry Regulatory Authority (FINRA) are issuing this Investor Bulletin to inform investors about social sentiment investing tools and highlight their risks. This Bulletin provides tips to consider before using tools that analyze or aggregate information from social media sources to make investment decisions or attempt to predict changes in the stock market’s direction or in the price of a security.

Social Sentiment Investing Tools

Investors use a variety of sources to gather information to make investment decisions. These sources can include analyst estimates, news stories, various measures of market volatility, and other tools. Recently, some investors have started using a new source of information to help make investment decisions – “social sentiment” investing tools offered by financial services firms that seek to aggregate or analyze social media data from various sources (e.g., Twitter or Facebook).

Examples of social sentiment investing tools include:

  • Social media data analysis. This type of social sentiment investing tool, offered by some financial services firms, uses natural language and other complex computer processing techniques to compile and analyze social media data including tweets, blog posts, and messages. These tools may claim to provide investors with indications of future market and economic performance along with, in some cases, positive/negative ratings of stocks and potential trading and investment strategies.
  • Social networking platforms. Some financial services firms have their own social networks that offer users access to stock-specific social media sentiment information and allow users to share and discuss investment and trading ideas with other investors.
  • Direct trading from social media websites or mobile applications. Some financial services firms offer investors the ability to trade in their brokerage accounts directly from social media platforms or mobile applications.
  • Crowdsourced research and analysis. Some firms have created “crowdsourced” social media research tools. These tools use a website or mobile application to crowdsource ideas and opinions from the public at large or from institutional investors. One emerging trend is to provide an “open platform” that allows contributors (such as analysts, investors and academics) to offer crowdsourced earnings estimates.

Potential Risks of Using Social Sentiment Investing Tools

Some investors may find value in using social sentiment investing tools to inform their investment decisions, but every investor should be aware that:

  • Information you get from social sentiment investing tools may be inaccurate, incomplete or misleading.
  • Stale social media data may impact the effectiveness of a social sentiment investing tool—for instance, the tool may contain old chatter and retweets, so the information provided by the tool might not be effective for its intended purpose.
  • Social media posts can have a hidden agenda. Posts can be used to spread false or misleading information to try to manipulate a stock’s price (either positively or negatively), resulting in real consequences for companies, particularly small or micro-cap companies, and investors who trade on this information.  For example, an SEC complaint charged an individual who sent false tweets to influence stock prices in two companies, using Twitter accounts resembling well-known securities research firms.
  • Depending on how it is presented, social sentiment information—particularly real-time discussion platforms and buy/sell indicators driven by social sentiment—may lead you to make emotionally-driven or impulsive investment decisions, which can be a risky way to approach investing.

Investor Tips

If you decide to use social sentiment investing tools as part of your investment research, please remember the following tips:

  • DO NOT RELY SOLELY on social sentiment investing tools to make investment decisions. Carefully review publicly disclosed company information, and consider reviewing other types of investment analysis, including fundamental value metrics.
  • Read all the disclosures, disclaimers, and background information provided by a social sentiment investing tool, including how the tool collects and analyzes social media data, and any risks or conflict of interests (for example, incentives from issuers or third-parties to promote a particular security).
  • Know your time horizon for investing. Information from social sentiment investing tools is generally short-term in nature (i.e., it focuses on events that may have an immediate impact on investments).
  • Track the performance of any investment decisions made using social sentiment investment tools. If you use information from a social sentiment tool to make decisions about buying or selling individual stocks or funds, remember to monitor their investment performance against major market or sector indices.
  • Create and follow a long-term financial plan. Do not let short-term emotions about investments disrupt your long-term financial objectives.  

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Additional Resources:

Call OIEA at 1-800-732-0330, ask a question using this online form, or email us at

Visit, the SEC’s website for individual investors and, FINRA’s website for individual investors.

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The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

By Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy

College Students


Now that your college exams are behind you, look ahead and think about your financial future. Right now you may be thinking, “I don’t make enough money with my part-time and summer jobs to think about saving and investing.” Whether you’re a freshman or a graduating senior, let me tell you why even small savings today can add up to big savings tomorrow.

It Pays to Start Early

The longer period of time you have to save and invest, the better off you’ll be financially. To get started, use our Investor Preparedness Checklist and go to for free tools and information.

Budget, Set Goals, Create a Plan

Ask yourself a few basic questions:

  • What goals do I want to achieve?
  • How much money do I need to achieve my goals?
  • How much can I afford to save and invest?
  • What’s my risk tolerance?

Think short term and long term. Create a budget for yourself so you can better learn how to manage your money. Figure out your “fixed” expenses (e.g., housing, groceries, transportation, student loans). Then, think about things beyond those expenses, such as going to the movies, dining out with friends, enjoying your favorite high-end cup of coffee, etc. Maybe in the short term, you want to buy a car or down the road you want to put some money away for an awesome trip. Also, consider credit card debt. Setting money aside to pay off high-interest credit card debt may be something for you to consider. No investment plan pays off as well as getting rid of high-interest debt. Factor all of those costs as you set your budget. Stick to it, and create a savings and investing plan that seeks to achieve both your short and long term goals. Our savings goal calculator can show you how much money you need to contribute to reach your goals.

The Power of Compound Interest

Any amount of money can grow over time through the power of compound interest. Let’s say you have an initial investment of $100 and each month you contribute $30 to that investment. That’s basically a dollar a day, less than a cup of coffee! In 30 years, with an average interest rate of five percent, you will have more than $24,000. Not a bad start. And consider this, as your earning potential increases, you may be able to contribute more money each month making that investment grow even more over time. Check out our compound interest calculator here.

Individual Retirement Accounts (IRAs)

I know it may sound crazy to think about retirement right now, but it’s never too early to start building that nest egg for the future. While you may be jumping around from job to job at this stage of your life, you can still contribute to a retirement account. An easy way to get started is to establish an individual retirement account (IRA). IRAs provide tax advantages for retirement savings and you can contribute a certain amount each year based on the maximum amount allowed by the Internal Revenue Service. Traditional IRAs involve contributions that are typically tax-deductible and you pay no taxes on the IRA earnings until retirement. Roth IRAs involve contributions that are made with after-tax funds, are not tax-deductible, but the earnings and withdrawals are tax-free. Choose which is best for you.

Free Money

Once you get your first “real” job, participate in your company’s 401(k) plan and max out any employer match if you can. Don’t wait, start right away. I can’t tell you how many times I’ve heard people say, “I don’t plan on being in this job for very long so I don’t want to deal with signing up.”  Guess what? They wind up staying in that job for years and they have missed out on years of saving and “free money.” It’s simple. If your employer contributes 50 cents for every dollar you save, that’s an immediate 50 percent return. No other investment will give you that kind of guaranteed return. Don’t miss out on this “free money!”

Research All Investments and Avoid Too Good to be True Opportunities

Research all investments thoroughly before investing. While some may think cryptocurrency and initial coin offerings (ICOs) are all the rage and you may want to get in on the action, think twice before doing so. Be aware of the serious risks involved with these kinds of investments. With social media, we hear about celebrity endorsements all the time. Don’t make investment decisions based off of your favorite celebrity who may be making money off of their endorsement. And, if the investment opportunity sounds too good to true, it probably is. Check out how to avoid fraud here. Conduct your own independent research and make decisions based on your goals and risk tolerance. Remember, as a first time investor, you may be better off looking at investment opportunities with some history rather than the latest trend.

School’s Out, Saving and Investing is In

Even though school’s out, saving and investing is in. Educate yourself and learn how to invest for your future.

The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This article expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.