What investor conversations online reveal
While marketers know that content marketing can be effective, they lack hard data pointing to which content is worth investing in. But such data exists.
Through social listening, marketers gain unique insights into investor thinking. By uncovering what clients care about, insights help create content that speaks directly to clients’ concerns and desires.
But where to listen? Social settings play a big role in shaping people’s behaviour: a person acting one way at a job interview may present entirely differently at a party. Social networks are no different.
Ground rules and incentive structures shape the type of conversations taking place. For social listening to extract meaningful information, selecting the right network and types of conversations is crucial. Four criteria are helpful for judging the suitability of platforms:
1. Anonymity: Investment and money issues are both highly personal and often sensitive. Therefore, the first factor to consider is the degree of anonymity a platform supports.
2. Content Collapse: On social platforms with an endless algorithmic feed, all types of content are jumbled together, competing for attention. Content Collapse negatively influences how much users actively engage with any one particular topic.
3. Social signalling: Tension exists between shallow-engagement metrics (such as ‘likes’, ‘shares’, or ‘retweets’) and deeper-engagement ones, such as comments.
4. Quality control: All social networks deploy a form of content quality control. On Facebook and Twitter, for example, most screening is automated. Alternatively, platforms may choose to apply forms of human moderation beyond algorithmic screening.
The table below shows a comparison of three leading social networks based on these four criteria (engagement data as of 2020).
At the time of the study, Reddit was the sixth most popular site in the United States, and the 18th worldwide. It was the third largest social network as measured by number of active daily users, after Facebook and Instagram, and ahead of Twitter.
Investment topics are discussed on many specialised Reddit communities, covering anything from personal finance to economics, from financial independence to stock speculation.
Here, we explore two significant communities hosting investor conversations: “r/Investing” (with over a million members, as of July 2020) and “r/UKInvesting” (seventeen thousand members).
The chart below illustrates the daily number of new conversations for ‘Investing’. During 2020, the data was strikingly correlated with the S&P 500 volatility index (VIX).
The analysis in this research delves into investor conversations, including frequency, depth of discussion, popular topics, and the typical language investors use.
1. How retail investors speak
The tactic of mirroring language use is particularly important in investment marketing. Aim too low, and readers will consider your content facile; use overly complex language, and readers will ignore your content in favour of more lucid sources.
Traditional readability tests (developed by the US military to make technical manuals easy to read) fail to advise on how to strike a balance between sophistication and readability. Since investment content readers are often highly educated, benchmarks are needed.
Here, to test relative complexity, we consider just the average percentage of words within a text that had three syllables or more. With words like ‘economy’, ‘investment’ or ‘government’ pervasive in financial market coverage, a certain baseline is expected.
As shown in the figure below, language complexity levels remain fairly consistent over time, for both the ‘Investing’ and ‘UK Investing’ communities.
This research revealed investment managers communicate to audiences in a language that’s, on average, 60% more complex relative to how investors actually speak.
The gap is particularly extreme when it comes to using words with four syllables or more. On average, such complex words are used in investment marketing content at double their natural rate.
2. Retail investors want an active component on top of a passive portfolio
How to sell the value of active investing to investors biased towards passive products? This video captures what the analysis reveals.
3. Vanguard’s Brand Equity + Interest In Bitcoin
When it comes to brand awareness, Vanguard looms large. Theirs are the most popular retail products in both communities. There’s also strong awareness of Vanguard’s blended, life-strategy products.
I’m not sure where the Vanguard hype came from, they haven’t been cheapest for multiple years now. They’re fairly unique on the LifeStrategy series, the Blackrock equivalent is more expensive and the Vanguard FTSE Global All-Cap is fairly unique. But I suspect its mostly due to their cheap platform for those with smaller amounts, and entirely free trading.r/UKInvesting
As for Bitcoin, retail investors’ interest remains robust. In both communities, there’s regular, active discussion on Bitcoin, including whether and how much to allocate to it.
Curiously, though it’s viewed as a speculative asset, investors commonly consider it akin to gold. While this view is not shared by professional investors, the consistency of this trend is interesting.
Bullish on Bitcoin. Especially given crazy experiments by central banks such as negative interest rates combined with a massive housing bubble pretty much everywhere. It’s either Bitcoin or gold going to the moon. And Bitcoin is simply better than gold, and less mature as an asset class. I would absolutely be buying right now if it weren’t for the fact that I’ve been over exposed to crypto for a number of years. Expecting solid gains in the coming months and years however.r/Investing
This research was covered in Forbes by wealth-management influencer April Rudin, in a story titled:
On the basis of this research, the UK Sustainable Finance and Investment Association commissioned a social-listening study on investor views on ethical investing.