Morningstar Investor users sign in here.

Personal Finance

Hello, I’d like to make more money: Editor’s Note

"If one does not know to which port one is sailing, no wind is favourable." - Seneca.


If you’d asked 22-year-old Emma why she started investing, she’d say to ‘to make more money’. Turns out she wasn’t so different from the average investor.

New research from challenger online broker Superhero this week shows half of their customers first invested in the stock market to ‘turn money into more money’. ‘Diversify my assets’ was ranked number two, with 18% of the vote, followed by build a nest egg’ in bronze with 14%.

‘Make more money’ is a completely reasonable response to the question 'why do you invest', and I believe given in all honesty. But I don’t think it’s a terribly useful answer. It’s an answer that isn’t an answer. It’s like saying you run because you like moving forward at speed, or you like sleep because it’s restful. Everyone invests to make more money, why else take the risk?

Why Superhero Customers Started Investing

Source: Superhero

Aimless investing clashes with the goals-based investing Morningstar subscribes to. This strategy asks first-time investors to develop a set of goals and prioritise them before they start thinking about which stock or ETF they’d like to buy, or which company is a possible 10-bagger. The investment decisions are driven by the individual’s needs and goals, and progress is measured against these, rather than focusing on generating the highest possible return or beating the market. For example, someone whose goal is to retire in 5 years structures their investments with an eye to liquidity and risk aversion.  

A goal-based framework in financial planning led to a 15% increase in investor wealth, according to a 2015 paper by David Blanchett, head of retirement research for Morningstar’s Investment Management group. Investors gained a sense of motivation and satisfaction with their plans when focused on personal goals over arbitrary parameters. It also reduced impulsive decision-making and overreacting to market volatility. But, as anyone who’s committed to getting fit in January knows, goals need to be concrete and achievable. Vague objectives like ‘make more money’ or 'be as rich as possible’ lead to poor decision-making, nudging us to blindly chase the highest possible returns, the latest hot trend or the best performing funds, or on the downside, panic in times of crisis, placing the focus on the account value rather than a quantifiable long-term goal.  

So, how can we set goals that are meaningful to us and reflect our motivations? Many people don't set goals because it’s difficult. When faced with a question like ‘what are your long-term goals’ we tend to obfuscate, say what’s top of mind or easy to recall. In 2018, Morningstar conducted an experiment to see if a simple behavioural nudge could help investors better identify what was really important to them. They came up with a list of common objectives to inspire and guide investors. Here’s the list:

Master list of financial goals

If you didn’t connect with any of these, here’s another way to quantify your financial goals. Goals should be SMART: Specific, Measurable, Adaptable, Realistic and Time-bound

  • Specific: well-defined, clear, and unambiguous.
  • Measurable: with specific criteria that measure your progress toward the accomplishment of the goal.
  • Adaptable: adjustable (if needed) in your regular portfolio review.
  • Realistic: within reach, realistic, and relevant to your purpose.
  • Time-bound: with a clearly defined timeline, including a starting date and a target date.

MORE ON THIS TOPIC: Investing basics: how to set financial goals (and stick to them)

When I defined my investment goals it made me feel centered, as if I had a foundation for tackling all the difficult decisions I need to make. It allowed me to calculate the return I needed to achieve my financial goals and select investments to suit. I went from ‘make money make more money’ to a set of concrete short-term and medium-term goals including ‘Be able to go on an overseas holiday once a year’ (man I’ve saved a lot over the last two years) and ‘Buy an apartment in 5-years with a 10% deposit’ (I achieved that one last year).

Finally, it’s important to remember that nothing is set in stone. As you change, so will your goals. Your first set of goals is a baseline, a jumping-off point to get you thinking, and a method by which you can measure your progress. As Morningstar’s director of personal finance Christine Benz says, starting out without a set of goals is like starting your day without a to-do list:

"You know how it is when you don't start a day with a to-do list? You get buffeted around by whatever comes up: phone calls, answering emails, chatting with colleagues. Managing your finances without first articulating your near- and long-term goals is pretty similar. The days will go by, and you'll no doubt find plenty of ways to spend your money. But you won't necessarily get to where you really wanted to go.”

More from Morningstar this week:



© 2023 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This report has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or New Zealand wholesale clients of Morningstar Research Ltd, subsidiaries of Morningstar, Inc. Any general advice has been provided without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782.

More from Morningstar

Does timing the market work?
Personal Finance

Does timing the market work?

Time in the market? Timing the market? Going against the herd? Investing success requires a bit of thought to achieve your goals.
Minimising taxes as an investor
Personal Finance

Minimising taxes as an investor

Choosing to invest as an individual or within a company or trust has several tax consequences for investors.
5 steps to create an investment strategy - Part 3
Personal Finance

5 steps to create an investment strategy - Part 3

Designing an investment strategy can be an expensive endeavour. Here is how to create one yourself.
The best investing book
Personal Finance

The best investing book

The book that every investor should read is a lesson on how life experience shapes an investing philosophy.  
How to successfully pick an investment property
Personal Finance

How to successfully pick an investment property

Australia’s top buyers agent lays down her strategy.
Does buying a house stack up financially?
Personal Finance

Does buying a house stack up financially?

Buying a house offers stability and a sense of community. But are you buying for these reasons? Or could your money work harder in other ways?