Thinking about the future can be exciting! Maybe you dream of travelling the world, buying your own place, starting a business, or simply not having to worry about money when you’re older. Investing can be a powerful tool to help make those dreams a reality. But what exactly is investing? In simple terms, it’s putting your money into things like company shares or funds with the hope that it will grow over time, giving you back more money than you started with.
It might sound complicated, but getting started and being successful often comes down to building good investing habits. It’s less about being lucky or picking one ‘winning’ stock, and much more about having a sensible plan and sticking to it patiently over many years. These habits can help your money work harder for you, building towards a more secure future. Let’s explore ten key habits that can make a real difference.
Important Note: Investing involves risk. The value of your investments can go down as well as up, and you could get back less than you originally invested. Unlike savings accounts, investments are not usually protected by the Financial Services Compensation Scheme (FSCS) if they perform poorly. This article is for educational purposes and is not financial advice.
1. Start Young, Even If It’s Just a Little: Unlock the Magic of Time
Imagine planting a tiny seed. With time, water, and sunshine, it can grow into a huge tree. Investing early works similarly, thanks to something magical called compound interest investing. This is where your initial investment earns a return (like interest or growth), and then that return starts earning its own return. It’s like a snowball rolling downhill – it starts small but gets bigger and bigger, faster and faster, the longer it rolls.
The most important ingredient for compounding is time. If you start investing early, even with small amounts like £10 or £20 a month, you give your money decades to grow and compound. Someone who starts investing at 18 could end up with significantly more money by retirement than someone who starts at 38, even if the later starter invests much larger amounts each month. Time is your superpower when it comes to investing, so starting the habit early is incredibly powerful.
2. Keep Adding Steadily: The Power of Regular Investing
Have you ever tried to save up for something big all at once? It can feel difficult. Investing a small, fixed amount regularly (say, every month) is often much easier and builds a great habit. This approach is known in the UK as pound-cost averaging explained simply: you invest the same amount of money each time, regardless of whether the market is up or down.
When prices are high, your fixed amount buys fewer investment units (like shares in a fund). But when prices are low, that same amount buys more units. Over time, this can help smooth out the bumps of market fluctuations and potentially lower the average cost of your investments. It also takes the stress out of trying to ‘time the market’ (guessing the perfect moment to buy – which is almost impossible!). Consistency is key; making regular contributions is one of the best beginner investing tips UK investors can follow.
3. Play the Long Game: Think Decades, Not Days
Investing isn’t usually a ‘get rich quick’ scheme. It’s more like training for a marathon than a 100-metre sprint. A successful long-term investing strategy means focusing on your goals that are many years, or even decades, away. The stock market will have good days and bad days, good years and bad years – that’s totally normal. News headlines might scream about market crashes or surges.
A crucial habit is to stay focused on your long-term plan and try not to get distracted or panicked by this short-term ‘noise’. Think about that seed growing into a tree – you wouldn’t dig it up every time there was a cloudy day, would you? You trust the long-term process. Similarly, successful investors generally stay invested through the ups and downs, trusting that over the long run, their investments have the potential to grow. Patience is a virtue in investing.
4. Build a Team, Not Just One Star Player: Spread Out Your Investments
You wouldn’t rely on just one player, however brilliant, to win a football match, would you? You need a whole team with different skills. Investing is similar. Putting all your money into just one company’s shares or one type of investment is risky. If that one thing does badly, your whole investment could suffer. This is where diversification investing comes in.
It means spreading your money across different types of investments (like shares, bonds – which are like loans to governments or companies), different industries (technology, healthcare, energy, etc.), and even different countries. The idea is that when some investments might be having a tough time, others might be doing well, helping to balance things out and managing investment risk. Think of it as having eggs in many different baskets – if one basket drops, you don’t lose everything. Many investment funds are designed to do this spreading for you.
5. Know Your Kit: Understand What You’re Investing In
Before you play a sport, you learn the rules and understand your equipment. Similarly, before investing, it’s important to do a bit of homework. You don’t need to become an expert overnight, but having a basic understanding of what you are putting your money into is crucial. If you’re buying shares in a company, what does that company actually do? If you’re investing in a fund, what kind of things does that fund invest in? What’s its goal?
The importance of investment research isn’t about predicting the future, but about making informed choices that align with your goals and comfort level with risk. Read the information provided by investment platforms or fund companies. Look up terms you don’t understand. Making informed decisions builds confidence and helps you stick to your plan, avoiding investments that seem too good to be true (they usually are!).
6. Watch Out for Hidden Hurdles: Keep Costs Down
Imagine running a race with weights tied to your ankles – you wouldn’t get as far, right? Fees and charges in investing can act like those weights, slowing down your money’s growth over the long term. There can be platform fees (for using an investment service), fund management charges (for the experts managing a fund), and sometimes dealing charges (for buying or selling investments).
These might look like small percentages, maybe 0.5% or 1% per year, but over decades, they can eat up a surprisingly large chunk of your potential returns due to the effect of compounding working against you. A key good investing habit is to be aware of the costs involved with any investment or platform and try to choose options with lower fees, especially for simple, long-term investments like tracker funds (which follow a market index). Keeping costs low means more of your money stays invested and working for you.
7. Set It and (Almost) Forget It: Make Investing Automatic
We all have busy lives, and sometimes even with the best intentions, things like making investments get forgotten. One of the easiest ways to build a consistent investing habit is by automating investments. Many investment platforms and banking apps allow you to set up regular monthly contributions, like a direct debit.
You decide how much you want to invest each month, choose where you want it to go (like into a specific fund), and the system automatically transfers the money and invests it for you. This takes willpower out of the equation. It ensures you invest regularly (tapping into the power of pound-cost averaging) without having to actively remember each month. It makes investing a seamless part of your financial routine, helping you stay on track towards your long-term goals effortlessly.
8. Don’t Panic When the Market Wobbles: Keep Your Cool
The stock market naturally goes up and down. Sometimes it drops quite suddenly, and seeing the value of your investments fall can feel scary. This is when emotions like fear and panic can take over, leading to common emotional investing mistakes. A big mistake is panic selling – selling your investments when prices are low simply because you’re afraid they’ll fall further. This often locks in losses and means you miss out on the potential recovery later.
The opposite mistake is getting greedy when markets are soaring, perhaps buying risky investments you don’t understand just because everyone else seems to be making money (often called ‘herding’). A vital habit is learning to manage these emotions. Remind yourself of your long-term investing strategy, remember that volatility is normal, and try to avoid making impulsive decisions based on fear or greed. Having a plan helps you stay rational when things feel chaotic.
9. Check Your Scoreboard, But Not Every Minute: Review Sensibly
While you don’t want to react emotionally to every market wiggle, you shouldn’t completely ignore your investments either. It’s a good habit to check in on your portfolio perhaps once or twice a year, or maybe when your circumstances change significantly. This isn’t about obsessively tracking daily performance, but about making sure your investments still align with your long-term goals and risk tolerance.
Sometimes, one type of investment might have grown much faster than others, making your portfolio unbalanced compared to your original plan (e.g., maybe you have way more shares than you intended). You might need to gently adjust things back towards your target mix – this is sometimes called rebalancing. A sensible review helps ensure your ‘team’ of investments is still playing the right formation for your long game, without getting caught up in pointless daily score-checking.
10. Never Stop Learning: Grow Your Money Knowledge
The world of finance and investing is always changing. New products emerge, economic conditions shift, and your own understanding will grow over time. Committing to lifelong learning about money management and investing is perhaps the most valuable habit of all. Read books (like the ones below!), follow reputable financial news sources (being wary of hype), listen to informative podcasts, or take free online courses.
The more you understand, the more confident you’ll feel making decisions and asking the right questions. This doesn’t mean you need to become a Wall Street guru, but building your financial literacy empowers you to manage your money effectively, adapt your strategies as needed, and stay secure throughout your life. Your knowledge itself is a powerful investment.
Conclusion: Building Your Financial Future, One Habit at a Time
Securing your financial future through investing isn’t about secret formulas or risky bets. It’s about building sensible, sustainable habits: starting early, being consistent, thinking long-term, diversifying, understanding what you own, keeping costs low, automating, controlling emotions, reviewing periodically, and always learning.
Like building anything worthwhile – a skill, fitness, or even a Lego masterpiece – it takes time, patience, and sticking to the process. By developing these good investing habits, you put yourself in a much stronger position to harness the power of investing and work towards achieving your future financial goals. Remember to start small, stay patient, and enjoy the journey!
Further Reading
Here are a few books available in the UK that can help teenagers and young adults learn more about money and investing:
- A Teenager’s Guide to Investing in the Stock Market: Invest Hard Now | Play Hard Later by Luke Villermin (A popular guide aimed specifically at young investors).
- Girls That Invest: Your Guide to Financial Independence through Shares and Stocks by Simran Kaur (Focuses on empowering young women, but great insights for everyone).
- Money Skills for Teens: A Beginner’s Guide to Budgeting, Saving, and Investing by Ferne Bowe (Covers broader personal finance topics including investing basics).
- How to Manage Your Money When You Don’t Have Any by Erik Wecks (While not purely investing, it covers essential budgeting and money mindset foundations).
- The Richest Man in Babylon by George S. Clason (A classic book using parables to teach timeless financial principles like saving and investing).
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