How to form an investing habit
14 May 2021
Whether you’ve decided to invest small amounts regularly, or to save up and invest a lump sum, forming an investing habit can be a really effective way of sticking to it.
Start small, then build
This is so important for habit forming. When you’re just getting started with your habit building, it’s more about getting the routines and behaviour sorted, and less about making a big impact. Crawl, walk, then run (if you will).
Don’t feel like you need to be investing hundreds of dollars a week when you first start building an investment habit. You can start really small—even $5 a week. Get used to the ritual of having the money go out of your bank account, logging into Sharesies, and investing. That way, it starts to feel routine, so it’s easier to stick to the underlying behaviours. You can build that amount as you feel comfortable.
Change the way you think about money
You can take a bit more of the pain out of this by changing the way you think about money. It’s easy to think of money in terms of numbers—$5, $10, $50, and so on. But really, money is just shorthand for things you can buy. $5 is a coffee from a cafe, with maybe a little left over. $10 is a craft beer in a bar. $50 is a good chunk of your groceries.
When you think about money this way, it becomes a bit easier to part with some of it in the short term. After all, if you use $10 today (i.e. one craft beer), and it becomes $50 a few decades in the future (i.e. a chunk of groceries), then that’s a pretty good deal! On the other hand, if your investment loses value, then looking back, you might have prefered the beer - but that’s the risk that comes with investing.
Keep it consistent
One major thing about a habit is that it’s the same every time you do it. You don’t lock your door a different way every day, and you probably cook dinner at around the same time every day. You may want to follow this lead when you’re starting an investment habit—keep as many things consistent as possible. The amount you invest, the day you invest, even the time you log in to make your purchases.The more consistent you can make your habit, the easier it will be to bed it in forever.
This also ties really well to an investment strategy called dollar-cost averaging. Dollar-cost averaging is when you invest the same amount on a regular basis, regardless of what the price is—it’s a great way to invest consistently and average out the short-term ups and downs of the share market!
But at the same time, make sure you’re not a robot. If your investments aren’t performing well, and it makes more sense to cash out and cut your losses, then don’t let a habit stand in the way of you doing so. Habits are useful, but you also need to make sure you’re making good decisions based on the information in front of you. If things change, you might want to re-evaluate and change your habit!
Get a squad
Most things are easier when you’re part of a team, and making an investment habit is no exception. Talking to people about your investing experience may make it easier to invest.
So get a buddy or two, and start your investing habit together. You’ll have someone to compare notes with, maybe have some friendly competition with, and you’ll hold each other accountable. Not bad!
Put your other habits to work
Another way to help make investing an ongoing habit is to build on top of existing habits. For example, if you get paid once a fortnight, you could set up an automatic payment to transfer some money to Sharesies that day. Sharesies will send you an email when the money enters your Wallet. Win!
Be kind to yourself
You’re going to slip up here and there. You might forget to transfer money, or you might raid your Sharesies account to buy something nice. If (or when) you do this, don’t throw in the towel! Life is busy and everyone misses their goals now and then. It’s much better to slip up once, then get back into your habit, than it is to slip up once, then give up forever.
So now that you’ve got some good tips, it’s time to get started! Let us know how you go, and if you have any great habit-forming tips!
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.