Future Focus: The best Christmas gift for an investor
Give yourself the best gift - use the time to get 2026 off on the right foot.
We’re entering a period ripe for poor financial decision making. Overspending in a frenzy of holiday shopping, tips you hear about hot investments at the BBQ and unhealthy comparisons about what’s under the neighbour’s Christmas tree can all trip you up.
It is a time where the perception of financial security, wellness and happiness come into laser focus. We’ve made it a tradition to open material possessions in front of each other where expectations are sometimes sky high and reactions are instantaneous.
We’re also entering a time where we reflect on the year that has been and where we’d like to be in the next year – which often leads to inadvertently setting ourselves up for failure with the same New Year’s resolution as the last few years. Most resolutions are forgotten by February.
Instead of falling into the traps set at this time of year, use this time to reassess how you approach this season and get yourself into a better place. It is a powerful opportunity as most of us have time to pause, reflect, and plan. Below are data informed actionable steps for investors.
Let’s take a look at focusing on what brings you joy, jumping onto the Santa Claus Rally, having measurable financial goals, communicating your legacy and planning for the year ahead.
Avoid consumer pressure and focus on what brings you joy
This period of the year can be fraught with consumer pressure. Consumer debt levels are high in Australia. The NAB Australian Wellbeing survey from Q2 2025 shows that the average Australian holds non-investment and mortgage debt in the following categories.
It is undeniable that cost of living pressures are impacting many Australians but that doesn’t change the fact that the average household is living above their means. It is easy to exacerbate this at a time where holiday marketing, sales, festive gatherings and material excess on social media is at a yearly high. This may seem extremely simplistic and condescending – ‘don’t spend money you don’t have’. However, having properly defined financial goals and knowing what you want can place guardrails on unnecessary spending.
Life is not just about making the most efficient financial decision. It is about trade-offs. To stay on track and make wise trade-offs requires understanding the opportunity cost of your decision – what are you giving up now and in the future? This isn’t just about the holiday season but instead about achieving your long-term goals.
Our behavioural research team has done some great research on how to get clear on what you actually want, and ensure that it is driven by your deeper goals, instead of surface level wants that are not going to contribute to long-term happiness.
The Santa Claus rally
Many investors look for the Santa Claus rally at this time of year to maximise their returns for the calendar year. The rally refers to a pattern of share-market gains in December, normally driven by retail investors. Investors anticipate a rally which tempts them to adjust portfolios and tactically allocate in the hope of catching a final burst of returns before the new year.
The Stock Trader’s Almanac defines the period as the last five trading days of December and the first two trading days of January.
Over the long-term, this period has statistically driven higher returns, but it is not every year. A pattern in the data can be real but is not a foolproof way to increase portfolio returns.
To potentially profit off a Santa Claus rally an investor would have to do the following:
- Investors must decide that they are going to time the market.
- Investors must hold cash and wait until before the rally to invest.
- Investors must take short-term positions in their portfolios that may not align with their goals.
Timing the market is not a sustainable strategy over the long-term. Morningstar conducts a study called Mind the Gap that looks at the difference between investor, and investment returns. The actions outlined above have been shown to be to the detriment of the returns an investor achieves. In the last edition of the study, investors reduced their returns by 1.2% p.a., attributed to cashflow timing, costs and tax efficiency.
Having clear goals and investing at pre-determined intervals reduced the risk of poor decisions. If you do tactically allocate and want to take advantage of market opportunities, focus on fundamentals instead of market folklore. The key to successful investing is acquiring quality assets at a reasonable price. Create a wishlist of quality assets and base your decision to invest on these quality assets reaching a reasonable price, instead of trying to time the wave of the market.
Turn vague resolutions into actionable and measurable financial goals
It is widely known that New Year’s resolutions are forgotten by the second month of the year. The gyms are always full in January and slowly empty out in February.
If you want to find success with your financial goals follows the same formula as normal goals by making them actionable and measurable. ‘Invest more’ and ‘save more’ aren’t going to do you much good. You’re more likely to have success going through a structured process to understand your circumstances and create specific goals from there.
For example, you decide that you want to save more. You run through your budget for the last 12 months and note your spending habits. You find places where you can cut back and understand the amount that you’re able to save for the next year.
‘Save more’ turns into ‘Cut back on Ubers on a night out and instead use public transport. Save an extra $300 a month’.
‘Invest more in super’ becomes ‘Automate my contributions to super, increasing my salary sacrifice by 5% a month’.
Structures goals like these are far more likely to be achieved than lofty, emotionally driven resolutions.
Communicate your legacy
Legal documents are needed to protect yourself and your assets. Unfortunately, over 50% of wills are contested in Australia. I’ve written on the best way to make your will as airtight as possible. Often, families are left making assumptions about what their loved one ‘would have wanted’. This uncertainty can cause resentment and irreparably harm relationships.
There are not many times where families are gathered in one place – Christmas and the New Years break tend to be one of those times. Having a conversation to make your intentions known while you are still around can leave space for questions or concerns you haven’t considered. Although the final decision is yours, you are able to explain why you have made the decisions, which is better than surprising your family after you pass away.
This conversation doesn’t need to be a daunting and dramatic experience. Having the conversation with all of your family at once can help with ensuring that the same message is delivered which could limit any contest after the fact. If this is not something that you want to do, start with one person and build to a larger group from there.
I can understand that this may be a conversation you want to avoid, especially around the holiday season. As someone who has sat in on a mediation process where a will was contested, I can adamantly say that this is the easier option that will leave more relationships intact. It is better communicated in person so all questions can be answered.
If you have a comprehensive estate plan set up that reflects your wishes, set up a time to have a conversation with your family. My colleague Danielle Labotka from Morningstar’s Behavioural Science team has written about the best way to approach this conversation.
Make a rational plan for bonus and payrise season
If you are a salaried employee that expects a bonus or a payrise at the beginning of 2026, now is a good time to make a plan for the additional funds. Although all of the specifics are not known, assessing your current financial situation and determining your path forward will reduce the chances of spontaneous poor decisions.
You can be more purposeful about additional income or lump sums, instead of absorbing it into your regular spending I’ve written about the perils of lifestyle creep before and avoiding giving up long term opportunity for short lived indulgence.
If you are unsure where your next dollar should go and need some guidance, I have created a framework to prioritise where to put your money.
Planned interruptions or breaks to full-time work
If you expect major life events in the coming year such as maternity leave, a career break, extended leave for caring responsibilities or any other time off, now is a good time to prepare.
You need to understand how taking time off will impact your cashflow and your ability to contribute to future financial goals. It’s important to consider the following:
- Super continuity: Without salary income, compulsory super payments stop. If your employer does not cover your superannuation during breaks such as for caring responsibilities, it can create a meaningful difference to your retirement savings. Plan ahead by rebuilding your super and contributing more post-career break, or easier still, sacrifice earlier to take advantage of time and compounding.
- Budget for the gap: Estimate your living costs during the break and confirm how much buffer or savings you’ll realistically need. This reduces the chance of dipping into long-term investments at unfavourable times and with tax costs. It could also prevent having to take on high interest debt if these costs aren’t estimated properly. For non-urgent breaks such as unpaid leave for travel, an educated understanding of costs may help with understanding a realistic timeline to realise these goals – you may postpone, but you will enjoy this time with peace of mind and stability.
- Adjust investment strategy: If you expect your income to be volatile in the coming year, consider the liquidity of your assets and adjust if needed.
Final thoughts
The festive season doesn’t always have to be about indulgence and comparison. It can be focused on reflection, deliberate action and focusing on the things that make you truly happy.
Enter the new year with a position of good financial decision making and positioning yourself for long-term success.
Invest Your Way
For the past five years, Mark and I have released a weekly podcast and written on morningstar.com.au to arm you with the tools to invest successfully. We’ve always strived to provide independent, thoughtful analysis, backed by the work of hundreds of researchers and professionals at Morningstar.
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