That is the question the financial industry and government regulators are trying to answer after a Twitter hoax in April that claimed President Obama was injured in an explosion at the White House.
That report caused the Dow Jones industrial average to drop temporarily by 150 points, erasing $136 billion in market value. The markets recovered in minutes, but the episode has heightened concern about the effect of social media on the global investment markets.
The world has never been a smaller place to live. With messages across the globe taking no more than a few seconds instead of days just decades ago, and even weeks 100 years ago. The effect for the investor is a double edged sword. Greater opportunities to invest in more diverse portfolios built from funds from around the globe, together with improvements in technology which keeps the investment servicing costs to a minimum making it possible for even the most inexperienced investor to dip their toe in the water.
But this comes at a cost, and that cost is the increase in short term investment volatility. Global news becomes local news, and there is nothing better at making the markets jump than a bad news story. One thing remains constant though, longer term investments carry less volatility.
The key to a successful investment is time in the market, not timing the market.