EDITOR'S NOTE: In our story below, SmartMoney looks at how Twitter is changing the investment-advice game. To help you keep up with the Twitter chatter, you can also read SmartMoney.com's weekly Twitter Beat column or follow us on Twitter @SmartMoney."

Twitter, a site originally best known for tracking the musings of celebrities and sports stars, is catching on with an unexpected new demographic: the serious investor. The site is essentially a vast shared blog where anybody can broadcast short messages, or tweets, about anything and where anybody can follow the commentary of anyone whose opinions interest them. And with fast-growing frequency, corporate titans, professional stock pickers, passionate financial amateurs and, yes, the media (including SmartMoney) are using the site to swap bite-sized commentary and information about investing and financial strategy.

One recent morning, a user surfing just one screen s worth of activity in the Twitterverse could find 29 different commentators weighing in on the virtues of buying Bank of America s stock; a video from Morningstar on funds for uncertain times ; dozens of quick question-and-answer exchanges between personal-finance guru Suze Orman and her followers (the mutual funds in a fan s Roth IRA? Not my favorite, quoth Orman); and, more provocatively, a string of messages assuring investors that the stock of obscure energy company Atlantic Wind & Solar will soon be going KABOOOM (presumably in a good way).

It all adds up to a blizzard of new information for investors to shovel their way through. The investing and finance news feeds on Twitter are cranking out at least 8,000 investment-related tweets every day an average of one every 11 seconds. StockTwits, one of the biggest stock-trading news services on Twitter, has gained 98,000 followers since it launched late in 2008 and is now adding roughly 9,000 each month. People who combine financial know-how with celebrity have an even bigger foothold; for example, more than a million people follow the SuzeOrmanShow feed. The growth is completely wild, says Howard Lindzon, cofounder and CEO of StockTwits.

What s perhaps more surprising is who s making up the audience. Although most tech analysts assumed Twitter would appeal only to young people accustomed to texting, it turns out that relative oldsters are big fans, too 45 percent of visitors to Twitter are over 35, and 17 percent are over 50, according to market researcher Quantcast. Nobody yet has studied the average net worth of Twitter users, but the service is picking up fans among well-to-do professionals. Quantcast estimates that 25 percent of users have incomes of $100,000 or more, and in one survey, 34 percent of executives under age 50 said they used Twitter regularly for business news. Figures like these suggest that what was once seen as a tool for the thumb-typing teen set is drawing an older, more affluent audience. And that, in turn, is luring financial-services companies and independent financial advisers all seeing an opportunity to generate business from the online interplay.

But what investors choose to do with that communication can open up a whole other can of worms. Many financial pros and analysts worry that Twitter is just one more way for trend-chasing investors to get themselves in trouble falling prey, for example, to pump and dump schemes designed to make con artists rich by getting the unwary to buy questionable stocks. Regulators are just beginning to make rules to keep brokers and fund companies from hyping the stocks they own, but there s already a blurry line between what companies officially tweet and what their employees do on their own time. Government agencies say they don t have a way of tracking tweets; for its part, the Securities and Exchange Commission declines to comment about when or whether it might make rules to govern what people say in Twitter s no-holds-barred atmosphere. For now Twitter s financial universe is a boomtown where the rules are still evolving kind of like Dodge City.

Unintended Consequences

When Twitter debuted in 2006, its inventors intended it to be little more than a rudimentary way for friends to send each other short updates. But many Twitter followers found that they could make tweets more useful by including links to longer pieces elsewhere on the Web. So while a tweet by itself might tell impressionable investors all they want to know ( Today is probably the day to buy BAC on the dip ), it could also link them to more detailed information. Joanna Robinson, the 29-year-old owner of a massage-therapy business in Washington, D.C., says her best tips come from messages that connect her to deeper research. Stocks she s bought in recent months have risen between 30 and 50 percent, keeping pace with the market s rally. She s been particularly struck by the cheerleading of like-minded investors. People were like, Don t keep your money on the sidelines, she says.

But it s not just small-time investors jumping on the tweeting bandwagon. Financial professionals quickly discovered that the site is a tool for staying connected to clients and even generating new business without doing a lot of one-on-one hand-holding. Carol Fabbri, a longtime consultant, started her own financial-advice practice in Denver three years ago. But in the past year she s managed to attract 2,200 followers including clients, potential clients and networking contacts on Twitter. In all, she says, she tweets about three times a week, and after particularly pithy pieces of advice, like a recent one about 401(k) plans If fees are over 1.5% (and most are) only contribute up to your employer s match. Keep your money. she says she receives a stream of thank you messages. It s a way to improve my reputation, she says, no small achievement given all the bad publicity her profession got during the 2008 crash.

Perhaps inevitably, Twitter has drawn the attention of financial-services giants too. At Boston-based mutual fund company Putnam Investments, CEO Robert Reynolds has gotten into the act. Recently, when the Dow closed over 10,000, Reynolds tweet-saluted it as an important investor milestone showing the market s strength ; a few weeks later, when Time magazine criticized the country s 401(k) system, Reynolds said the publication missed many key points, and he linked his followers to a critique he d written.

But critics are already posing an awkward question: What exactly can the pros say on Twitter? While many are using it to suggest investment strategies and recommend specific stocks, the endorsements can only go so far.

According to FINRA, the industry-funded group that regulates broker-dealers, Twitter should fall under the same rules as other advertising and publications which means, in practice, that brokers can t make promises about how an investment will perform or make misleading statements. Certified financial planners are supposed to operate under similar rules, says the CFP Board, the industry group that sets their ethical guidelines. Still, some industry insiders say those rules are inadequate. An adviser who says you might want to consider buying this stock is being cautious and ethical, says Los Angeles wealth manager Mitch Freedman; someone who says you ve gotta buy this stock! is crossing the line, especially since readers are getting that advice in a vacuum. But in a medium where short, pithy headlines grab readers attention and often get widely passed along or retweeted the you ve gotta buy messages can get much more mileage.

An Old Problem in a New Medium

None of the regulations in place now are likely to address what might be Twitter s thorniest issue: The hype factor. The most incendiary booing and cheering for stocks is done by amateurs who can say and do whatever they want much to the woe of some investors. Naresh Vissa, a student at Syracuse University, started dabbling this fall in investing based on Twitter tips. One morning he sank $300 into a stock based on a message from a trader he d come to trust. After going to class, Vissa went online and got some unwelcome news his investment had fallen 30 percent in just a few hours. He bailed out of the stock. These days he steers clear of day-trading and uses Twitter mostly to follow economists and news media. Hot stock tips aren t useful to me now, he says.

Still, some pros fear that a horde of investors will make similar impulse buys. Bullish tweets can be useful tools in the age-old practice of pump-and-dumps, in which investors promote stocks they already own and sell them once new buyers drive the price up. Although the practice can be legal as long as the promoter discloses his ownership and doesn t outright lie, the technique has been used to take advantage of gullible buyers for generations with messages spread by telegraph in the 1920s, by phone in the Reagan era and by e-mail during the tech boom. Twitter could be the next evolutionary twist for this hardy species: Crooks are already coming on like cockroaches, says StockTwits CEO Lindzon. And the roaches are harder to spot on Twitter, because in a 140-character tweet, there s no room to include a disclaimer.

The SEC says it has no investigations on record related to Twitter posts. But the site s format makes it ripe for hype, especially when it comes to so-called penny stocks cheap stocks that are prone to volatile price swings. Take the example of Atlantic Wind & Solar. The commentator who said it was going kaboom went on to recommend the stock 25 times in two weeks, during which time its price more than doubled, to $4.60. The tweeter was a Web newsletter, PennyStockChaser.com, which has more than 28,000 followers. Its Web site features a disclaimer saying that the newsletter receives compensation, and its employees or members of their families may hold stock in the profiled companies. Among the stock it says it holds: 140,000 free shares of Atlantic Wind & Solar. (Atlantic says it did not give any shares to PennyStockChaser.com.) Whatever its potential, Atlantic is a start-up with no profits so far, and after the tweet flurry ended, so did the stock s run in the next three days it fell below $3. A spokesperson for the newsletter says it sold most of its stock during the surge, adding, We wouldn t tell people to buy something that wasn t good....Have we taken advantage of people? No we haven t.

At the end of the day, even Twitter s biggest advocates say investors can t count on regulators to save them from questionable advice. And some users are just fine with that. Kunal Desai, an executive recruiter in Detroit, says his investing style has changed dramatically since he joined the site in 2008. He has gone from being a buy-and-hold guy to someone who trades several times a day, flipping little-known stocks. I m getting really good, says the 28-year-old. Desai trusts the advice of some tweeters so much that he ll make a trade based on just one message. Last May he did just that with United States Natural Gas, an exchange-traded fund, and snared a 20 percent return in three weeks. I trust the guy who did the research on it, Desai says. I don t even have to look for myself.