One of the best ways to build and grow a solid investing habit is to “set-and-forget.” This means exactly what it sounds like: setting up an automatic payment (AP), investing a regular amount (either manually or through an auto-invest order), and forgetting about it on a day-to-day basis.
Of course, this doesn’t mean you forget about your investment entirely! It’s still useful to check in now and then. But setting-and-forgetting is a great way to stay on track in between check-ins, and reach your financial goals. Here’s why:
No fuss, no friction
Habit-building is all about making things easy. The less work you have to do, the easier it is to maintain a habit. That’s why things like 1-click online shopping are so (sometimes dangerously) popular.
You can use this principle to your advantage by setting up an automatic payment from your online banking, then setting up an auto-invest order in Sharesies. This automates the entire process—from paying money from your bank account to making an investment in Sharesies. Everything runs in the background, making it super easy to build an investment portfolio.
You can’t miss what you don’t have
If you pay PAYE income tax, you probably have a good idea of what you get paid each week, month, or fortnight. And you probably have a less clear idea of how much you’re paying in taxes, ACC levies, student loan payments and KiwiSaver contributions. That’s because you never really see these—even though you’re paying them. Since you pay them before your money reaches your bank account, it doesn’t “feel” like you’re paying them.
The same principle applies to investing. If you set up a regular AP to transfer money to your investing, the minute you get paid, you won’t notice it in your bank account in the first place. This makes it easier to stick to your habit because you set aside the same amount each time. So you have whatever’s left over after your investment money leaves your bank account—just like you do with your salary after taxes.
We’ve talked about this principle a lot: by investing a small amount, on a regular basis, you can average out the ups and downs of the share market. You might get more shares one week, and less shares other times, but these will even each other out over time.
This saves you the trouble of trying to time the market—which even the best investment professionals struggle to do! By automating your investments, you can avoid the stress of wondering if you’re getting a good deal or not and cut your pesky human nature out of the equation. Just choose an amount, decide what to invest in, and how often, and forget about it. It gives you all the benefits of dollar-cost averaging, without needing nerves of steel.
Build up over time
Your investment goal may be big, small or somewhere in between. But no matter how large it is, you can get there slowly and steadily by auto-investing. If you auto-invest $100 a week, you’ll have $10,000 in 2 years—and you’ll get all those compound returns along the way.
This is a great way to achieve your investment goals without affecting your day-to-day spending too much. Just choose a goal, set a time horizon, then automatically invest a portion of that every week, fortnight or month. It’s up to you!
Now that you know the benefits of a “set-and-forget” approach, it’s time to put your knowledge to work! Just set up an AP, log in to Sharesies, and choose what you want to auto-invest in, on a regular basis. Then forget about it for awhile! But be sure to check in every now and then—it’s about forgetting for now, not forgetting forever.
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed a return, and you might lose the money you started with. Before investing, you should read your fund’s product disclosure statement. It contains the investment objectives, risks, fees and other information. You should carefully consider this information in relation to your investment time frames and goals.