How often you invest, like your other investing decisions, ultimately comes down to personal preference and what you can comfortably afford to put aside for the long term (usually a minimum of five years). But we want to introduce you to a way of investing many choose to go for: regularly, each and every month.
Here we’ll chat through the ins and outs of regular investing: reasons to do it, considerations before you get started and, as always with this series, how you can actually go about it.
Let me tell ya something funny – when I first started investing, I thought I needed to check my stocks every hour like some kinda Wall Street hotshot. Boy, was I wrong! After some painful lessons (and a few impulsive trades I regret), I’ve learned that finding the right frequency for buying shares is super important for investment success.
If you’re wondering “how often should I buy shares?” – you’re asking exactly the right question. The answer isn’t one-size-fits-all, but I’ve got some insights from experts that might help you figure out what works for your situation
The Evolution of Stock Trading: Then vs. Now
If you want to feel ancient, think about how stock trading used to work:
- You had to call a broker on the phone (like, an actual conversation!)
- You typically had to buy in round lots of 100 shares
- You paid high fees that ate into potential profits
Nowadays trading is completely different. You can buy stocks with a few taps on your smartphone often with zero commission fees. But just because you can trade constantly doesn’t mean you should.
As Randy Frederick, vice president of trading and derivatives at Charles Schwab & Co., says: “There’s nothing wrong with trading actively, but the question of ‘how much is too much’ will differ by individual, by risk tolerance, and by net worth.”
Why Frequent Trading Often Leads to Poor Results
Academics have studied this issue extensively A famous study by Brad Barber and Terrance Odean called “Trading Is Hazardous To Your Wealth” found something shocking investors who traded the most underperformed the market by a whopping 65 percentage points annually!
Why did frequent traders do so poorly? Several reasons:
- High commissions (in the past)
- Bid-ask spreads (the difference between buying and selling prices)
- Emotional biases affecting decision-making
- The zero-sum nature of trading – institutional investors often win at retail investors’ expense
Even though commissions have largely disappeared, Barber (a professor at University of California, Davis) tells Money: “Retail investors still lose from [trading], but the losses are less because spreads and commissions have gone down. Trading is a zero-sum game: If institutional investors profit from trading, then individual investors will lose.”
The Psychological Traps of Frequent Trading
The smartphone in your pocket makes trading dangerously easy. This convenience can trigger several psychological biases:
- FOMO (Fear Of Missing Out) when you see a stock rocketing upward
- Overconfidence bias, making you think you’re better at trading than you really are
- Loss aversion, causing you to sell underperforming stocks at the worst possible time
- Action bias – the feeling that doing something is better than doing nothing
Another study co-authored by Barber, “Attention Induced Trading and Returns,” found that when retail investors (particularly on platforms like Robinhood) rush to buy a particular stock, it often leads to negative returns in the following month. Features like “Top Movers” and “Most Popular” lists can trigger impulsive, poorly-timed trades.
So How Often Should You Really Buy Shares?
There’s no magical number of trades that’s right for everyone. Some investors might make hundreds of successful trades yearly, while others might make zero and be perfectly content.
But I can give you some principles to consider:
1. Buy and Hold Still Works Best for Most People
For typical retail investors who aren’t great at market timing (which is most of us!), frequent trading isn’t the way to go. As Warren Buffett famously said, “our favorite holding period is forever.”
Most everyday investors shouldn’t be dabbling too much in individual stocks anyway. Even well-known companies can occasionally crash to zero during market turmoil (remember 2008-09?).
Instead, focus on broad baskets of securities that protect your downside. Professor Barber recommends: “In general, I recommend that investors use a low-cost index mutual fund or ETF for their core long-term investment.”
That doesn’t mean you should totally ignore your investments. Schwab’s Frederick suggests rebalancing once or twice yearly, since your asset allocation might drift during normal market movements.
2. Consider the “How Much” Rather Than Just “How Often”
Rather than obsessing over frequency, think about the percentage of your portfolio you’re actively trading.
Frederick suggests keeping at least 80% of your holdings in long-term investments that you leave alone to grow. With average market returns approaching 10% annually, this approach should compound nicely over decades.
With the remaining 20%, you could consider more active trading if that’s something you enjoy. Even if those speculative trades don’t work out, your financial future shouldn’t be severely impacted.
3. Be Honest About Your Trading Motivations
Before hitting that “buy” or “sell” button, pause and examine why you’re making the trade:
- Is it based on emotion like euphoria or panic?
- Was it triggered by seeing a stock on a trending list in your app?
- Are you trading out of boredom or the desire to feel in control?
- Do you have a well-researched thesis about why this is a good move?
If your motivation is primarily emotional or based on superficial factors, take a breath. Good trading decisions should come from careful evaluation of fundamentals.
As Barber notes: “There is emerging evidence that the way information is presented to investors affects how they trade. Apps with a large number of subscribers have the potential to generate collective action.”
And remember, sometimes doing nothing is the smartest strategy. “Over-trading can definitely be a problem,” warns Frederick. “The S&P 500 is up around 70% since its bottom in March [2020]. If you sold early on to take some profits, you missed out on the next move higher — while you’re sitting in cash earning zero.”
Finding Your Personal Stock Buying Rhythm
I’ve found that the right frequency for buying shares depends on several personal factors:
Your Investment Strategy
- Long-term investor: Consider monthly or quarterly purchases to benefit from dollar-cost averaging
- Dividend investor: May align purchases with quarterly dividend announcements
- Value investor: Buy only when specific valuation criteria are met, regardless of timing
- Active trader: Might make multiple trades weekly or daily (only advisable for those with expertise)
Your Financial Situation
- Regular income: Consider setting up automatic investments timed with your paycheck
- Lump sum availability: Invest when funds become available (bonus, tax refund, etc.)
- Cash flow constraints: Time purchases when you have sufficient emergency funds
Market Conditions
While timing the market is generally discouraged, there are reasonable approaches:
- Consider increasing purchase frequency during major market corrections
- Reduce buying during periods of extreme market euphoria
- Maintain consistency regardless of market conditions for long-term success
My Personal Approach (What Works For Me)
After years of experimentation, I’ve settled on a hybrid approach:
- I contribute to index funds automatically every month regardless of market conditions (80% of investments)
- I keep a “watch list” of individual stocks I like and buy them quarterly if they meet my criteria (15%)
- I allow myself a small “fun money” account for more speculative trades, limited to 5% of my portfolio
This system helps me avoid emotional trading while still feeling engaged with the market. I’ve found that this balance works well for my personality and financial goals.
Bottom Line: Quality Over Quantity
The question shouldn’t really be “how often” but rather “how effectively” you’re buying shares. A few well-researched purchases a year will likely outperform dozens of impulsive trades.
As I’ve learned (sometimes the hard way), the frequency of trading is far less important than:
- Having a clear investment strategy
- Keeping costs low
- Maintaining diversification
- Controlling emotions
- Thinking long-term
Remember Warren Buffett’s wisdom: “The stock market is a device for transferring money from the impatient to the patient.”
So take a deep breath, develop a plan that works for your specific situation, and stick to it. Your future self will thank you for your restraint and discipline!
What’s your approach to buying shares? Do you have a system that works well for you? I’d love to hear your thoughts and experiences in the comments below!
Reasons to invest regularly
Many people believe the myth that you need a huge stash of cash to start investing – and that’s definitely what I thought before getting started. The truth is you can invest with as little as £25 a month and build up your investments over many years.
Besides the obvious financial barrier to investing a big lump sum in one go, when starting out investing, doing it all at once can feel quite scary. So, taking it a month at a time, and smaller amounts at a time, can be a great way to ease yourself in. It may also mean you can get started investing sooner than you think.
Regularly investing isn’t something you need to add to the diary or set a reminder for. Most providers now offer this way to invest as standard, so you can set it up and pretty much forget about it. ‘Pretty much forget’ because it’s important to keep an eye on your investment portfolio, just in case your financial goals change or you need to diversify to reduce your risk.
Setting up your regular investments involves choosing the amount you’ll invest each month and telling your provider the investments you want that amount to buy. Orders in, your money is put to work for you, automatically each and every month, without you lifting a finger. You can sit back, relax and bask in your organisational glory!
A little something called ‘pound-cost averaging’
There’s a lot to be said for regular investing from a behavioural perspective – it can be a great financial habit to get into. But it’s also worth mentioning the smoother returns it could bring you, thanks to something known as ‘pound-cost averaging’. This sounds like a confusing bit of jargon, so let’s explain.
When you put aside the same amount to invest each month, as you’d do with regular investing, you’ll be buying more units or shares of an investment when its price is low, and less when the price is high. That means you’re averaging out the price you’re buying at, reducing the risk of putting all your money in at the market peak. Here’s a little example to help make sense of it.
Let’s say I put aside £25 each month to invest in The Best Company in the World. When the market is down and its share price is low at £5 per share, I’ll be buying five shares with my £25. But when the market is up and The Best Company in the World is thriving at a sky-high £10 per share, my £25 can only get me 2.5 shares. So, I’m taking advantage of the market (and price) dip by buying more at that time, while protecting myself from buying all my shares when the price is at a high.
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FAQ
What is the 3-5-7 rule in stocks?
How much do I need to invest in stocks to make $1000 a month?
You’ll need a portfolio worth about $300,000 generating a 4% dividend yield to earn $1,000 in monthly passive income. Building a diversified collection of 20 to 30 dividend stocks across different sectors helps protect your income.
Is investing $100 a month in stocks good?
If you invest $100 a month in good growth stock mutual funds at prevailing market rates from age 25 to 65, you’ll end up with about $1,176,000. The secret isn’t the amount. It’s that you didn’t miss a single month for 40 years. $100 can make you a millionaire when you’re steady, predictable, and disciplined.
What is the 7 3 2 rule?
The “7-3-2 rule” most commonly refers to a financial strategy for wealth building, not a single concept. It suggests a goal of saving your first crore (10 million rupees) in 7 years, then your second crore in 3 years, and your third crore in 2 years, leveraging compounding and disciplined investing. It can also refer to a trucking industry regulation for splitting mandatory driver breaks or a rule of thumb for estimating investment needs.