How ‘Free’ YouTube Finfluencers Advice Costs Investors

Mumbai: In the digital age, a new generation of financial influencers or Finfluencers has risen to prominence, capturing the attention of millions through engaging YouTube videos, Instagram posts, and Twitter threads. Armed with compelling stories and promises of quick wealth, they have made the stock market seem like a thrilling, accessible opportunity for everyone. But as more Indians flock to these platforms for investment advice, experts are raising alarms about the hidden dangers that come with this newfound enthusiasm.

These influencers, many of whom are not formally trained in financial analysis, excel at storytelling, making complex financial concepts seem simple and actionable. Their knack for creating relatable content educating junta on the less known terms and concepts of the stock market, has earned them a large following. Their recommendations often include high-risk, high-reward strategies. However, their ability to captivate an audience doesn’t equate to genuine financial expertise.

“They’re incredible at telling stories and making the stock market sound like a way to achieve quick success,” says financial consultant Anupam Mehra. “But the truth is, understanding the market requires years of experience, research, and an analytical mindset. Many of these influencers just don’t have that level of knowledge.”

A significant factor contributing to this growing trend is the rise of investment apps. These apps have made it easier than ever to trade stocks and equity, allowing users to invest with a few taps of their smartphone. With features that make trading feel like a game—complete with easy-to-read charts and instant transactions—these platforms have simplified investing, enticing millions of new participants.

However, while these apps make it incredibly easy to invest, they are also set up to profit from every trade. Regardless of whether an investor makes a profit or a loss, the app earns a commission on every transaction. This creates a scenario where the platforms benefit from activity rather than success. Financial experts point out that these apps are designed to encourage frequent trading, which often leads to higher fees and losses for users.

“What people don’t realize is that the apps make money off their trades,” explains Mehra. “It doesn’t matter if the investor wins or loses; the app takes its cut every time. And reports show that, out of 100 investors, 93 will end up in loss, especially when they’re jumping in and out of stocks based on influencer advice.” As reported by Money Life, about 20.2 lakh individual retail investors in India consistently chase a zero rate of return on their stock investments when they make decisions themselves.

This high-risk environment is often exacerbated by the stories promoted by financial influencers. Many of these influencers emphasize the potential for massive returns, particularly from speculative stocks or penny stocks. These stocks, often from small or unstable companies, are highly volatile and risky. Yet, influencers often highlight the rare success stories—those who have made huge profits—while glossing over the significant losses that come with such investments.

Penny stocks, which are frequently promoted by both influencers and media outlets, are a prime example. Headlines like “This Penny Stock Rose 2,000% in a Year!” make the idea of investing in such stocks seem like a golden opportunity. However, the reality is that these stocks are often poorly regulated, highly speculative, and prone to drastic price fluctuations. Financial advisors stress that investing in penny stocks is a gamble, not a strategy for building wealth.

Yet, as the hype around high-risk stocks grows, many new investors are drawn in by the prospect of quick riches. “There’s no other form of legalized gambling,” Ashish Gupta, the chief investment officer at the mutual fund for Axis Bank, told the FT (as reported by The Daily Upside.) The combination of influencer advice, media stories, and easy-to-use investment apps creates a perfect storm, leading many to chase after fast returns without fully understanding the risks involved.

While influencers and investment apps continue to profit from this trend, the majority of individual investors are left with significant losses. Business Standard reported that ‘aggregate losses of 11.3 million individual traders exceeded Rs 1.8 trillion over the three-year period between FY22 and FY24. In FY24 alone, individuals incurred about Rs 75,000 crore in net losses.‘ The message that real wealth is built over time, through steady, long-term investments in diversified portfolios, is drowned out by the noise of high-risk stock picks and “get rich quick” promises.

Regulators are starting to take notice of the issue, with SEBI issuing warnings about penny stocks and tightening regulations on influencers who promote high-risk investments without adequate disclaimers. However, enforcement remains a challenge, and the rapid growth of investment apps and social media influencers makes it difficult to keep pace with the evolving landscape.

Ultimately, the rise of finfluencers/financial influencers and easy-to-use investment apps has democratized access to the stock market. However, the consequences of unwise decisions are often far-reaching, with many investors left facing losses they can’t afford. Financial experts urge investors to be cautious, reminding them that the stock market isn’t a shortcut to wealth. Instead, they advise a disciplined approach—focused on long-term goals, skill development, and steady growth—if true financial success is to be achieved.