Bachelor's Honors Project - Hong Kong Baptist University, School of Communication
By Judy Li
Xiaohongshu (or RED) is also becoming a popular platform for people to share and look for fund investment advice. More people, especially younger investors with little knowledge about fund investment are now seeking advice on RED. There are also lots of journal articles and reports commenting on this phenomenon with doubts and criticisms towards RED fund-related posts and its users. This project aims to study the investment behavior of the people who browse information on RED and to compare with the conclusions from some published reports. Noticing that there is a rising trend discussing fund investment on RED, the study hopes to bring a reference to investment beginners on their choice of information sources and also a primary source for further research on the RED usage and investment decisions.read more ABOUT BACKGROND
Such a popular topic has aroused the attention of professionals. iResearch Consulting Group reposted a journal article from the most popular web portal about fund investment, ChinaFund.cn, criticizing the unauthorized KOLs sharing their fund investment experiences on RED and Bilibili. The article mentioned that, regarding the behavior of some fund influencers recommending funds, some voices questioned their involvement in “illegal securities investment consulting”. iResearch Consulting Group focuses on internet media, e-commerce and some other new economic fields that relate to Chinese internet industry, providing advanced market research reports and supplying online business services in China.
Yuefeng Wu (2021), fund manager of one of the top Chinese private placement companies, Fengjing Equity, shared his opinion towards the influencers and the posts on RED and Bilibili after reading them. “It is obvious that they are not professional. When they are explaining the terms about funds, they are not even sure about whether the content is right or wrong.” Wu suggested that there are many investment beginners following the influencers decision on fund investment which is not a wise decision. He mentioned that both the receivers and deliverers on social media are not educated enough in finance or even certificated as a professional analyst. That is risky both financially and ethically.
There are few features that are worth noticing in the phenomenon of RED and fund investment. Firstly, the content of fund investment on RED is more attractive than regular financial news from the first sights. Secondly, the fund investment related posts received more views or likes on RED than regular financial news or finance reports from the banks, such as the Mar.25th fund market review from the Bank of Communication (2021). In order to dig deeper in the study, Cognitive Fit Theory and the Halo Effect Theory will be used as the theoretical frameworks to support the research. Respectively, these two theories will provide a solid foundation to explain the impact of different presentation types and the attractiveness of influencers on RED.
Social media influencers talking about investment are not reliable. Some influencers have CFA, ACCA, which is good. But having these certificates doesn't mean a rich experience on investment. Their opinions might be right but might not be right for my portfolio.
Bloomberg is definitely the best platform for people to take reference on investment. They provide first-hand information directly from the organizations such as companies or banks. For example, Tencent will publish its report on Bloomberg first but they won't publish it to social media. As for the general public that cannot get access to it, mainstream media such as Financial Times and Wallstreet Journal are the best choices for them to take a look on making investment decidsions.
Funds have the risk of blind obedience, Internet finance Subject to so many restrictions. Even if it is hot now, will it still be hot in the future? This matter is too risky, and it is not something to be encouraged.
In terms of behavior, no one will swipe their mobile phone with the mentality of doing research. The tweets/videos on Xiaohongshu can explain clearly to others within tens of seconds. There is a high risk in Internet finance. The guidance of social media consumption behavior is essentially contrary to the current domestic regulatory direction.
In this survey, the participants aged from 18 to 74, the majority of them are 21-24 years old. Most of them are female, which takes 63.40% of the total. 3 of the participants defined them as non-binary/third gender and 2 of them prefer not to tell the gender. These participants had a very diverse educational background. Most of them were from business and communication majors. Others include medicine, engineering and so on. The participants were mostly investment beginners. As the questionnaire result showed, around 35% of the participants think they do not have any other experience on investment apart from savings, and around 50% of them said they have little knowledge of investment and they are beginner, making investment on savings, insurance and funds, which fits the target group of the survey.
The study tried to explore the research questions in many ways such as the platforms they use to learn fund investment, their investment experiences and so on. Below, there are some scientific statistics figuring out the relationships that the investment beginners’ behavior on RED compared with other platform users.
Posts related to fund investment on social media are not reliable for investors to take reference according to many professionals. Compared with mainstream media platforms, social media information of investment is lapsed. However, the result tested by this study shows that investment beginners are actually aware of the reliability of the influencers’ posts. It is necessary to set regulations towards fund investment on social media to restrict or inform the risk and avoid misleading the users.
In this situation, it is crucial to rethink the behaviors of investment beginners and conduct further behavioral studies based on the new findings from this study. To develop the relative research in the future, the findings in this study provides a basic behavioral assumption of investment beginners who are less experienced and stick to social media information. Limitation also existed in the study. To know more about it, please click here.