Are your habits helping or hindering?

Top tips to keep you on top of your investment journey

By Daniel Lane, Fidelity Personal Investing

How many times have you checked your phone today?

Now, what portion of those was because you actually needed to and how many were out of habit?

Don’t worry, we’re not here to discuss the perils of screentime - I’m fairly certain your eyes won’t go square - it’s the habit-forming element that we’re looking at.

The little everything-machines in our pockets are pretty ubiquitous by now but I’m finding the more I use mine the more fidgety and distracted I am, and I don’t like it.

We respond emotionally to the red notifications, vibrations and dings and it’s no accident. They are all designed to excite us and make us want to react and interact immediately without even thinking about it.

But is it such a bad thing? Well, if we carry over the same hyper-urgency to our investing then yes.

Constantly logging in and tinkering with your portfolio is just not likely to yield good long-term results. The more you rashly jump between investment ideas the less likely you are to actually give them enough time to play out. Ever made the mistake of hopping between queues in the supermarket? Same thing.

But of course what we’re talking about here is habit - what we do without thinking. And here the solution might be to get a new habit, not spend our lives ditching the old one.

Nobel Prize winner Richard Thaler popularised Nudge Theory to help us out - it’s all about prompting good behaviour, not punishing the bad. Think fruit bowls round the house rather than keeping the biscuits under lock and key.

For investors this can mean setting up nudges from the outset that avoid the opportunity for bad habits to creep in. The likes of a monthly savings plan means you don’t even need to log in to invest money and a reminder (on your phone of course) to check in on your account six months from now means you’re still in control.

Our Investsense engine on your account is there to remind you about things like using your ISA allowance or topping up to pay fees so you can remove those itchy fingers even further from hasty actions, just look for the lightbulb icon.

In the end, spontaneity is never part of a good long-term investment strategy. Nudges are about helping us avoid the buy or sell we’ll regret tomorrow and follow through on the decisions we made at the beginning. When we’re tired, under pressure or excited it’s easy to make the wrong choice and that’s when it’s good to know it’s all being taken care of in the background without us.

Important Information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.