The Investor’s Mindset: Tiny Habits

September 2020


Hey there,  

Welcome to The Investor’s Mindset, a monthly newsletter where smart investors get smarter and we dive into one core topic each time. Hello to the thousands of new investors who have joined us since August! If you’re reading this but haven’t subscribed, you can join 500,000+ readers by signing up for an M1 account here



The Tiny Habits mindset


In this case, the space we’re talking about is personal finance. Unless we have good habits, our chances of seeing our financial goals through are about as good as a coin flip. That’s even if we have great tools and research. 

This is because without habits, we rely on motivation to reach our goals. The problem? Motivation is inconsistent, even for those of us who have seemingly endless amounts. And we’d know – after all we are building The Finance Super App. 

With so many variables in finance, finding pockets of predictability is easier said than done. Luckily, Stanford University researcher Dr. BJ Fogg did it for us in his book Tiny Habits. 

How it works

Dr. Fogg’s research found that with some adjustments, behavior can be predictable. He says there are three ways we can change our behavior: have an epiphany, change our environment, or take baby steps.  

First things first, you can count out “have an epiphany.” We may be smart investors, but we’re not wizards. Otherwise, we’d be making millions predicting the market. And while changing our environment is tempting, we can’t really do that either – unless someone single-handedly controls the existence of the stock market and hasn’t mentioned it yet.  

So, we’re left with baby steps and a fill-in-the-blank sentence from Dr. Fogg: “After ____, I will _____.”


Why you should care

Other than the fact that you control your ability to build these habits, you should care because implementing good ones can directly impact your financial goals.  

Here’s how we think about it: if we made regular investment contributions to our portfolios five years before we started, what would today look like? Sure, there’s always a risk of loss. But it’s possible the power of compound interest could have multiplied with the extra time.  

That little habit of a regular contribution could have given us a better chance of reaching our goal, even if it was a big one. That’s the power of Tiny Habits

We put it into practice


Our mindset writeup above wasn’t the end of our research into the intersection of Tiny Habits and finance. If you do nothing else, here are the highlights from the hours our team spent on it:



Tiny Habits: a smart investor’s superpower

Your mindset is only as good as the foundation it’s built upon, and we’re giving it to you in this post. Plus, we dive into the magic of starting small – if you’re still holding onto the wizard idea.


How to build financial habits that stick

Dr. Fogg may have come up with the basic template, but there are a few other factors in play when building Tiny Habits. Some of which you may have not yet considered.


You don’t need motivation to achieve your financial goals 

We already told you motivation is too inconsistent to rely on, but we didn’t explain why. In this post, we dig into the science behind motivation and why we’re serious when we say you don’t need it


You’re doing it wrong: how to reduce friction in your financial journey 

Tiny Habits have an enemy, so we have an enemy (besides day trading) and that enemy is friction. It’s making your financial life harder than it needs to be

Our MVPs of the internet


You want to create lasting change; we want to empower you. So, we scoured the internet for more resources on Tiny Habits. Here’s what sparked our interest: 

Dr. Fogg discussed the evolution of his research on The Knowledge Project. He dives deep into motivation, like how to ride the motivation wave and why it’s so inconsistent in the first place. 

We’re not sure we can send a newsletter about habits without mentioning James Clear, author of Atomic Habits. We’ll talk about his perspective on habits later. For now, we’ll leave you with this rabbit hole of his knowledge

It turns out Dr. Fogg, James Clear, and our team aren’t the only ones thinking about habits. There’s a school of thought that emphasizes something on top of the Tiny Habits formula: rewards. We can even test different rewards to see how they impact our habits.  

Bonus: here’s a peek into some of our

Tiny Habits 


When we say we believe in something, we mean it. Here are some of the Tiny Habits our team practices:  

  • “After I contribute to my IRA, I will contribute to my taxable account.” 
  • “After I get cash back, I will contribute to my IRA.”  
  • “After I receive dividends, I will reinvest them in my portfolio. I’ll turn auto-invest on to make it effortless.” 
  • “After I receive a paycheck, I will deposit it into my Spend account…and automate it so it’s even harder to break.”  

Just for fun


Something new to solve 

Can you solve this riddle? 

Adam, Sarah, and Nathan each have two Pies in their portfolio. Lauren, Andrew, and Kate each have one Pie in their portfolio. How many Pies are in Reagan’s portfolio? 

Tweet or email us with the answer! We’ll reveal in next month’s newsletter.  


From last month 

Last month we asked you a riddle and wow did you answer! Congratulations to those of you who guessed correctly and thanks to everyone for participating.

Here’s the original riddle:

You can pick one of three hidden pies. One pie is in the green, but the other two are in the red. Your goal is to pick the green pie. You then pick a pie.

Before your choice is revealed, one of the pies you didn’t choose is revealed to be red.

You are then given the option to change your choice.

Should you switch? Why or why not?


And here’s the full answer:

Yes, you should switch pies! 

If your first choice was pie A, you had a 1/3 chance that it was the pie in the green. That means there was a 2/3 chance that either pie B or C was the pie in the green. 

So if you stick with pie A, you have the same 1/3 shot. Not bad. But remember, one of the pies you didn’t pick (let’s say pie B) was revealed. It’s in the red. 

If you switch to pie C, you double your chances of getting the pie in the green, a 2/3 chance. 

Until next time


Thanks for reading! If you’re still here, that means we did something right. 

We hope you learn something new every time you read The Investor’s Mindset. We also hope you’ll respond to this email with feedback and a Tiny Habit of your own. We read them all. 

And if you like this month’s edition, why not share it?  


Talk soon,  

The M1 Team 


P.S. We mentioned it earlier, but we’re only sending our newsletter to current clients. You’re welcome to join us here

P.P.S. M1 Finance is not affiliated with any of the authors, books, or other non-M1 links or mentions in this newsletter. We’re just fans. 

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