This thread has inspired me to write down my IPS. I have an Excel spreadsheet where I track my balance sheet, asset allocation, budget, etc., but I've never formally written down my IPS. I've had it floating around in my head for a little while, but actually writing it down has been fun and helpful in making me refine my goals. Here it is. Comments or suggestions are welcome.
(A little background: I'm 23, discovered Bogleheads about 6 months ago and it's been transformative for me - so thank you all.)
---Investment Policy Statement
(as of 5/5/13)Savings Accounts
401k @ company: XX
Roth 401k @ company: XX
Roth IRA @ Fidelity: XXNew Contributions
401k: 17,500 or limit
Roth IRA: 5,500 or limit (back door if necessary)
Taxable: at least XXInvestment Philosophy:
Long term buy and hold. Use total market index funds whenever possible. Avoid trying to beat the market or time the market. Keep expense ratios as low as possible.
Always have at least a 6 month emergency fund. Avoid lifestyle inflation. Current (2013) spending is about $XX/yr - try to keep as close to that as possible. Save at least 50% of net income for as long as possible.
Equities: ~30% international, a small tilt to SCV (or ext. market) is fine
Bonds: Roughly (Age - 10) to (Age - 5)
Rebalance at least annually, preferably with new contributionsInvestment Objectives:
1) Retire by age 55 in 2044 with at least $X mil in today's (2013) dollars
-XX/year income @ 2.5% SWR (consider taxes, medical costs...)
-this is roughly 2x current (2013) expenses
-before age 59.5, live off taxable accounts
-after retired, convert TIRA to Roth up to 10% or 15% bracket each year
(This goal is subject to change if I get married, have kids, etc. I'm not too attached to it, but it's a target to shoot for right now.)
2) Down payment on a house in 5-10 years
-must put at least 20% down to avoid PMI
-house should cost no more than 3x gross income
-a $300k home will require a 60k down payment
-ideally save for down payment only after maxing out retirement accounts
-buy as little house as needed
-location is important (close to work, grocery stores, etc)
-consider 15 year mortgageAsset Allocation:
Initial Allocation (age 23):
Total US Stock Market: 50%
US Small Cap Value or Ext. Market: 10%
Total Int'l Stock Market: 25%
By age 25, have 20% in bonds. Continue with Age - 5.
US TSM: 46%
US Ext Mkt: 10%
Int'l Stock: 24%
By retirement, should have at least 50% in bonds.Monitoring and Rebalancing:
Monitor monthly, quarterly, or yearly.
Rebalance if 5 pct points or 25% away from target ("5/25").
Rebalance preferably with new contributions.Taxable Investing:
I will only start taxable investing for retirement after I have maxed out tax-advantaged accounts, and saved for short-medium term goals (such as a house down payment).
I will start buying I-bonds @ Treasury Direct ($10k/yr) at age 30. I-bonds can be tax deferred for 30 years, so they will start maturing when I'm 60. I-bonds can be redeemed after 1 year. If they are redeemed before 5 years, there is a penalty of last 3 months' interest. Thus, after one year, they can be part of my emergency fund. I could count them as part of my bond allocation too.
I will consider EE bonds (also $10k/yr max). These double in value after 20 years.
Consider:http://www.bogleheads.org/wiki/Principl ... _Placementhttp://www.bogleheads.org/wiki/Placing_ ... ed_Account
When I have taxable accounts for retirement, I will allocate them as follows:
Int'l Stock (for foreign tax credit)
I will consider holding my taxable accounts at Vanguard and tax loss harvesting using the following pairs: (to be researched more thoroughly when the time comes)
-Total Int'l (FTSE Global All Cap ex-US)
-Vanguard FTSE All-World ex-US Index Fund (excl small cap)
-80% S&P500 / 20% Ext MktReasons for changing IPS:
-Do not change IPS based on short term market performance.