IPS – looking for details from Nisiprius, Livesoft and others

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northernboy
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IPS – looking for details from Nisiprius, Livesoft and others

Post by northernboy » Fri Mar 02, 2018 2:29 pm

Greetings all,

I’ve never had an Investment Policy Statement before but I do recognize the value and would like to put one together. Been searching around for examples and feel I have a decent idea with what to put into one. However, to help ensure I fully think this through in a proper manner I am engaging the minds of the collective here for their insights and recommendations.

I realize that an IPS can be somewhat lengthy in some/many cases. Rather than asking for people to post their full IPS I am looking for the most relevant/important portions of your IPS to share. Which ‘rules’ or guidance in your IPS have been the most impactful? Asset Allocation, re-balancing strategy, draw-down approach, tax minimization, etc.?

Please share your thoughts and experience.

Thanks and Regards,
-Northernboy

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One Ping
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by One Ping » Fri Mar 02, 2018 2:36 pm

I'm definitely not Nisi or Livesoft, but you could try the wiki for ideas ... https://www.bogleheads.org/wiki/Investm ... _statement
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by cfs » Fri Mar 02, 2018 2:52 pm

I have a single page RETIREMENT Policy Statement. Here are two good articles from Christine Benz from Morningstar on how to create the documents.

How to Create an Investment Policy Statement [Morningstar]: http://www.morningstar.com/articles/808 ... ement.html

How to Create a Retirement Policy Statement [Morningstar]: http://www.morningstar.com/articles/808 ... ement.html

Please, keep it SIMPLE. My signature applies, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

livesoft
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by livesoft » Fri Mar 02, 2018 2:52 pm

My IPS is so simple that it is not even written down.

I have described my asset allocation in detail in this thread:
viewtopic.php?t=150267

The only "rule" I have is that I absolutely must buy shares of an equity fund/ETF on a bona fide RBD. Otherwise it is just the normal rebalancing and tax-loss harvesting while keeping transaction costs to zero and taxes to very close to zero.
Wiki This signature message sponsored by sscritic: Learn to fish.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by MotoTrojan » Fri Mar 02, 2018 3:02 pm

northernboy wrote:
Fri Mar 02, 2018 2:29 pm
Greetings all,

I’ve never had an Investment Policy Statement before but I do recognize the value and would like to put one together. Been searching around for examples and feel I have a decent idea with what to put into one. However, to help ensure I fully think this through in a proper manner I am engaging the minds of the collective here for their insights and recommendations.

I realize that an IPS can be somewhat lengthy in some/many cases. Rather than asking for people to post their full IPS I am looking for the most relevant/important portions of your IPS to share. Which ‘rules’ or guidance in your IPS have been the most impactful? Asset Allocation, re-balancing strategy, draw-down approach, tax minimization, etc.?

Please share your thoughts and experience.

Thanks and Regards,
-Northernboy
The less subjective the better for my personality. Explicit rules for rebalancing such as band size, how to handle taxable vs. tax-advantaged (taxable only in December and only to get within band sort of thing). Similarly with tax-loss harvesting, when do you do it (over $1000 all year, any amount in December) and which funds do you partner with (I allow myself to TLH ANY amount, if it gets me from the partner back to my core fund).

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by triceratop » Fri Mar 02, 2018 3:20 pm

livesoft wrote:
Fri Mar 02, 2018 2:52 pm
My IPS is so simple that it is not even written down.
It occurs to me that this fails the most essential part of having an IPS -- drift, thinking one must change the IPS, one's asset allocation, etc etc.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by livesoft » Fri Mar 02, 2018 3:25 pm

triceratop wrote:
Fri Mar 02, 2018 3:20 pm
livesoft wrote:
Fri Mar 02, 2018 2:52 pm
My IPS is so simple that it is not even written down.
It occurs to me that this fails the most essential part of having an IPS -- drift, thinking one must change the IPS, one's asset allocation, etc etc.
I cannot disagree with that, but I have posted my asset allocation here on the forum as well as the funds I use in my previous response to the OP: viewtopic.php?t=232734

Such public posts are almost like a written IPS and help me follow through on what I do.
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2015
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by 2015 » Sat Mar 03, 2018 10:35 am

I confess to having engaged in Simplicity Heresy in that my IPS is probably (IIRC) about 8 pages long. I was greatly influenced by a confluence of writers outside the fields of economics, investing, and personal finance regarding the dangers of confusing outcome with process in decision-making. I wanted to ensure I didn't conflate luck, of which life is comprised greatly, with skill. Having gone through this exercise a few years ago, I'm now in the position to pare down or even eliminate the IPS as I almost never have a need to even refer to it anymore.

My IP is the only area in my investing life where lethargy bordering on sloth hasn't existed.

software
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by software » Sat Mar 03, 2018 2:11 pm

2015 wrote:
Sat Mar 03, 2018 10:35 am
I confess to having engaged in Simplicity Heresy in that my IPS is probably (IIRC) about 8 pages long. I was greatly influenced by a confluence of writers outside the fields of economics, investing, and personal finance regarding the dangers of confusing outcome with process in decision-making. I wanted to ensure I didn't conflate luck, of which life is comprised greatly, with skill. Having gone through this exercise a few years ago, I'm now in the position to pare down or even eliminate the IPS as I almost never have a need to even refer to it anymore.

My IP is the only area in my investing life where lethargy bordering on sloth hasn't existed.
What do you even write for 8 pages? Either you are not sticking to just the important details or your “investment policy” is grossly over complicated.

dbr
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by dbr » Sat Mar 03, 2018 2:44 pm

I don't have an IPS. It isn't that complicated.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by longinvest » Sat Mar 03, 2018 2:57 pm

My investment spreadsheet is my Investment policy statement (IPS).

But, just in case I forgot about it, my IPS is also embedded tersely in my current posting signature:
  • 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds
As for the philosophy justifying it, it's dispersed through my few thousands posts on this forum and its Canadian sister forum (FWF).
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Noobvestor » Sat Mar 03, 2018 3:10 pm

software wrote:
Sat Mar 03, 2018 2:11 pm
2015 wrote:
Sat Mar 03, 2018 10:35 am
I confess to having engaged in Simplicity Heresy in that my IPS is probably (IIRC) about 8 pages long. I was greatly influenced by a confluence of writers outside the fields of economics, investing, and personal finance regarding the dangers of confusing outcome with process in decision-making. I wanted to ensure I didn't conflate luck, of which life is comprised greatly, with skill. Having gone through this exercise a few years ago, I'm now in the position to pare down or even eliminate the IPS as I almost never have a need to even refer to it anymore.

My IP is the only area in my investing life where lethargy bordering on sloth hasn't existed.
What do you even write for 8 pages? Either you are not sticking to just the important details or your “investment policy” is grossly over complicated.
OK, 8 pages is long, but ... I find it helpful to expand when I encounter a new situation. For instance, I was using tax-exempt bonds in taxable, but my IPS called for Treasuries (with exceptions for taxable), then Treasury yields went up, and I wasn't sure when to switch back to them. Similarly, I was trying to figure out if I should rebalance in taxable or in tax-advantaged space in a semi-complex situation - didn't have a good rule for that. My larger point here is that a longer IPS can help deal with nit-picky issues that arise, saving me from having to revisit my thinking each time.

Rebalancing thread: viewtopic.php?t=236874

Bonds thread: viewtopic.php?p=3783036

Thankfully, Bogleheads are here to help me figure out the answers to these questions, and flesh out my IPS!
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

longinvest
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by longinvest » Sat Mar 03, 2018 3:15 pm

Noobvestor wrote:
Sat Mar 03, 2018 3:10 pm
OK, 8 pages is long, but ... I find it helpful to expand when I encounter a new situation. For instance, I was using tax-exempt bonds in taxable, but my IPS called for Treasuries (with exceptions for taxable), then Treasury yields went up, and I wasn't sure when to switch back to them. Similarly, I was trying to figure out if I should rebalance in taxable or in tax-advantaged space in a semi-complex situation - didn't have a good rule for that. My larger point here is that a longer IPS can help deal with nit-picky issues that arise, saving me from having to revisit my thinking each time.

Rebalancing thread: viewtopic.php?t=236874

Bonds thread: viewtopic.php?p=3783036

Thankfully, Bogleheads are here to help me figure out the answers to these questions, and flesh out my IPS!
I use Two-Step Rebalancing which conveniently sidesteps wash-sale problems and elegantly deals with assets allocated across multiple accounts.

Of course, it's implemented in my personal investing spreadsheet.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Sandtrap » Sat Mar 03, 2018 3:33 pm

cfs wrote:
Fri Mar 02, 2018 2:52 pm
I have a single page RETIREMENT Policy Statement. Here are two good articles from Christine Benz from Morningstar on how to create the documents.

How to Create an Investment Policy Statement [Morningstar]: http://www.morningstar.com/articles/808 ... ement.html

How to Create a Retirement Policy Statement [Morningstar]: http://www.morningstar.com/articles/808 ... ement.html

Please, keep it SIMPLE. My signature applies, y gracias por leer ~cfs~
+1
Excellent links.
An IPS Statement is as unique as each person's financial and personal situation, life's goals, lifestyle, risk tolerance, and long term goals.
If you are inclined, you might try writing one along with a portfolio review and get input from the forum "experts" such as Nisiprius, Livesoft, and others, on it.

DW and I have a simple 3 page IPS. There is a heading on the top of each page that says, "No Freaking Out".

j :D

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by cfs » Sat Mar 03, 2018 4:06 pm

For those who want to keep it really really really simple.

"Why your investment strategy should fit on an index card" [Christine Benz, Morningstar]

http://cawidgets.morningstar.ca/Article ... &id=843104

To all individual investors, gracias por leer ~cfs~
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by nedsaid » Sat Mar 03, 2018 6:52 pm

Morningstar has a nice worksheet on its website in .pdf form. Try it out. That is what I used to write mine.
A fool and his money are good for business.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by grabiner » Sat Mar 03, 2018 8:00 pm

I consider the last paragraph to be one of the most important parts of my IPS, and one I recommend for others:
This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change in the statement at that time.
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by nedsaid » Sun Mar 04, 2018 12:38 am

grabiner wrote:
Sat Mar 03, 2018 8:00 pm
I consider the last paragraph to be one of the most important parts of my IPS, and one I recommend for others:
This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change in the statement at that time.
Grabiner, this is excellent. Too many people think that once written that their IPS is like the 10 Commandments coming down with Moses from Mt. Sinai. It seems to be written in stone and not to be changed. The idea is to get your thoughts on paper and to have a written investment plan, it is not meant to be an immutable document. The other error I see is that people make this a tactical document and not a strategic document. Pretty much they will say, "If the market does X, I will do Y." An investor needs to allow themselves flexibility. Things do change over time and we have to adapt to those changes. I see this as more a statement of investment philosophy and also the broad outlines of your plan. People try to get way too specific and detailed with these.

Again, Morningstar has an excellent worksheet in .pdf form on their website. I highly recommend it. Just print the document and fill it out, and viola! You will have an Investment Policy Statement. Of course, you can go from there and put your IPS in a different format. But it gets you started and that is the most important thing.
A fool and his money are good for business.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by MJW » Sun Mar 04, 2018 2:55 am

dbr wrote:
Sat Mar 03, 2018 2:44 pm
I don't have an IPS. It isn't that complicated.
I don't have one, either. Having a "policy" committed to print isn't going to increase or change my inclination to act one way or another. My general rule of thumb is that if I'm having to think hard on it, I'm probably making it too complicated.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Dandy » Sun Mar 04, 2018 8:53 am

I don't have a written IPS. I am lucky to have a decent income floor and asset level and have been consistent in my investment approach during my 10 years in retirement. Here is my non written plan:

1. Follow Dr. Wm Bernstein's general idea of having "X" years of draw down in "safe" products e.g. FDIC products/short term bond funds.
2. Have a decent allocation to Inflation Protected funds- targeted dollar amount.
3. Keep my equity allocation between 40 and 43%. Be more likely to prevent the allocation to fall below 40% than if it slightly exceeds 43%.
4. When there is a conflict between #1 and # 3 favor #1.
5. Target rebalance review once a year - birthday. Emphasis on overall equity vs fixed income allocation and # of years of drawdown adequacy. Don't get caught up in excessive rebalancing of sub allocations --keep focus on overall risk/safety.
6. Allow an occasional buy of equities on dips as long as result keeps equity allocation within target range.
7. Move toward more simplicity due to advancing age and non investment oriented spouse.
8. Keep track of expense run rate to determine if there is meaningful expense creep or decline.
9. Emphasis on index or low cost passive investments.
10. RMD - withdraw more from "risk" assets when they perform well.

I realize that a written IPS has value -- most of which is to codify a rational investment management approach and help prevent mission creep.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by dbr » Sun Mar 04, 2018 8:57 am

Dandy wrote:
Sun Mar 04, 2018 8:53 am

I realize that a written IPS has value -- most of which is to codify a rational investment management approach and help prevent mission creep.
I am a fast typist and have a good word processor available. I could redo any reasonable IPS in less than five minutes, presumably every morning when I get up after I read the news. Heck, you can even draft a hundred variations and just key up the one you want to use today.

Well, this is tongue in cheek. The process of thinking about how you invest is very important. The concept that this is enshrined to some degree for stability is important. I think it is easy to take the literal existence of an IPS document too seriously.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Sandtrap » Sun Mar 04, 2018 10:49 am

nedsaid wrote:
Sun Mar 04, 2018 12:38 am
grabiner wrote:
Sat Mar 03, 2018 8:00 pm
I consider the last paragraph to be one of the most important parts of my IPS, and one I recommend for others:
This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change in the statement at that time.
Grabiner, this is excellent. Too many people think that once written that their IPS is like the 10 Commandments coming down with Moses from Mt. Sinai. It seems to be written in stone and not to be changed. The idea is to get your thoughts on paper and to have a written investment plan, it is not meant to be an immutable document. The other error I see is that people make this a tactical document and not a strategic document. Pretty much they will say, "If the market does X, I will do Y." An investor needs to allow themselves flexibility. Things do change over time and we have to adapt to those changes. I see this as more a statement of investment philosophy and also the broad outlines of your plan. People try to get way too specific and detailed with these.

Again, Morningstar has an excellent worksheet in .pdf form on their website. I highly recommend it. Just print the document and fill it out, and viola! You will have an Investment Policy Statement. Of course, you can go from there and put your IPS in a different format. But it gets you started and that is the most important thing.
well said,
do you have the link to the morningstar pdf?
thanks,
j

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Peculiar_Investor » Sun Mar 04, 2018 11:03 am

Sandtrap wrote:
Sun Mar 04, 2018 10:49 am
do you have the link to the morningstar pdf?
Check the External links section of the Investment policy statement wiki article.
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by corn18 » Sun Mar 04, 2018 11:08 am

Here's mine:

Objective: $XM in savings by age 55.

Asset Allocation (AA): 60% stocks / 40% bonds with 25% of stocks international

Rebalance when AA gets outside of 5% or annually

Invest in very low cost index funds

Do backdoor Roth for myself and wife annually ($6500 me, $5500 wife). Leave in cash in traditional IRA while waiting to roll over to Roth. Wait one week to do roll over to Roth to allow funds to clear. Once in Roth, lump sum investment into total stock market index fund. Funds for backdoor Roths will come from RSU sale, bonus or pension.

Invest maximum allowed in 401k ($24,500) at a rate that maximizes company match. Use 401k to manage 60/40 AA. Invest only in low cost index funds where possible in 401k.

Invest maximum allowed in 401k after tax and do a mega backdoor Roth annually. Lump sum investment into total stock market index fund.

Invest 5% of annual salary allowed into company non qualified deferred compensation plan (NDCP) in order to get the company match.

Minimize current taxes by investing only in total stock and international stock index funds in taxable account. Tax free muni bonds up to $50k is also allowed in the taxable account.

Minimize future taxes by concentrating bonds in 401k. Maximize growth in Roth accounts by investing in total stock market index funds.

Restricted Stock Units (RSU): When RSU's vest, sell immediately and invest the money in a lump sum in accordance with my Asset Allocation (AA) in my taxable retirement account.

Bonus: Invest entire bonus each year in a lump sum in accordance with my Asset Allocation (AA) in my taxable retirement account.

Invest a minimum of $75k annually in taxable account. Lump sum investment into total market, total international market or tax free muni's to manage AA. This can be met by RSU, bonus or pension.

Military Pension: Cash savings to be used to refill EF, if required, or save for new car, home repair, etc. If not required for any of these functions by Mar of each year, then invest any amount over $30k in a lump sum into taxable account in accordance with AA.

Mortgage: do not prepay mortgage

Life Ins: Maintain multiple term life policies laddered until age 78. As savings becomes sufficient to maintain DW current lifestyle with low risk, policies will be allowed to end without renewal.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Sandtrap » Sun Mar 04, 2018 11:11 am

Peculiar_Investor wrote:
Sun Mar 04, 2018 11:03 am
Sandtrap wrote:
Sun Mar 04, 2018 10:49 am
do you have the link to the morningstar pdf?
Check the External links section of the Investment policy statement wiki article.
Got it!
Couldn't find it going direct to Morningstar.
Will forward to son and DIL.
mahalo,
j
MORNINGSTAR IPS STATEMENT WORKSHEET PDF FILE
http://news.morningstar.com/pdfs/invest ... pr2016.pdf

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by nedsaid » Sun Mar 04, 2018 12:04 pm

Sandtrap wrote:
Sun Mar 04, 2018 10:49 am
nedsaid wrote:
Sun Mar 04, 2018 12:38 am
grabiner wrote:
Sat Mar 03, 2018 8:00 pm
I consider the last paragraph to be one of the most important parts of my IPS, and one I recommend for others:
This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change in the statement at that time.
Grabiner, this is excellent. Too many people think that once written that their IPS is like the 10 Commandments coming down with Moses from Mt. Sinai. It seems to be written in stone and not to be changed. The idea is to get your thoughts on paper and to have a written investment plan, it is not meant to be an immutable document. The other error I see is that people make this a tactical document and not a strategic document. Pretty much they will say, "If the market does X, I will do Y." An investor needs to allow themselves flexibility. Things do change over time and we have to adapt to those changes. I see this as more a statement of investment philosophy and also the broad outlines of your plan. People try to get way too specific and detailed with these.

Again, Morningstar has an excellent worksheet in .pdf form on their website. I highly recommend it. Just print the document and fill it out, and viola! You will have an Investment Policy Statement. Of course, you can go from there and put your IPS in a different format. But it gets you started and that is the most important thing.
well said,
do you have the link to the morningstar pdf?
thanks,
j
http://im.morningstar.com/im/InvestPolicyWS.pdf

Above is the worksheet that I have been using. It appears Morningstar has reworked it and come up with a new format.
A fool and his money are good for business.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Sandtrap » Sun Mar 04, 2018 12:54 pm

nedsaid wrote:
Sun Mar 04, 2018 12:04 pm
Sandtrap wrote:
Sun Mar 04, 2018 10:49 am
nedsaid wrote:
Sun Mar 04, 2018 12:38 am
grabiner wrote:
Sat Mar 03, 2018 8:00 pm
I consider the last paragraph to be one of the most important parts of my IPS, and one I recommend for others:
This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change in the statement at that time.
Grabiner, this is excellent. Too many people think that once written that their IPS is like the 10 Commandments coming down with Moses from Mt. Sinai. It seems to be written in stone and not to be changed. The idea is to get your thoughts on paper and to have a written investment plan, it is not meant to be an immutable document. The other error I see is that people make this a tactical document and not a strategic document. Pretty much they will say, "If the market does X, I will do Y." An investor needs to allow themselves flexibility. Things do change over time and we have to adapt to those changes. I see this as more a statement of investment philosophy and also the broad outlines of your plan. People try to get way too specific and detailed with these.

Again, Morningstar has an excellent worksheet in .pdf form on their website. I highly recommend it. Just print the document and fill it out, and viola! You will have an Investment Policy Statement. Of course, you can go from there and put your IPS in a different format. But it gets you started and that is the most important thing.
well said,
do you have the link to the morningstar pdf?
thanks,
j
http://im.morningstar.com/im/InvestPolicyWS.pdf

Above is the worksheet that I have been using. It appears Morningstar has reworked it and come up with a new format.
Seems a lot better than the other one.
Thanks,
j

2015
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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by 2015 » Sun Mar 04, 2018 2:54 pm

software wrote:
Sat Mar 03, 2018 2:11 pm
2015 wrote:
Sat Mar 03, 2018 10:35 am
I confess to having engaged in Simplicity Heresy in that my IPS is probably (IIRC) about 8 pages long. I was greatly influenced by a confluence of writers outside the fields of economics, investing, and personal finance regarding the dangers of confusing outcome with process in decision-making. I wanted to ensure I didn't conflate luck, of which life is comprised greatly, with skill. Having gone through this exercise a few years ago, I'm now in the position to pare down or even eliminate the IPS as I almost never have a need to even refer to it anymore.

My IP is the only area in my investing life where lethargy bordering on sloth hasn't existed.
What do you even write for 8 pages? Either you are not sticking to just the important details or your “investment policy” is grossly over complicated.
Negative. At least not in my case. OTOH, the ISP may not be 8 pages, it might be 6. I don't know. I don't care. Haven't looked at it in quite a while. Only purpose of an ISP for me is to hammer out my thinking in the most important areas of investing. Putting this thinking and rationale behind such thinking was an important part of the process. Having done that, I "bat away" (to quote Buffett) a wide swath of circular investing debates here and elsewhere, read no financial press, and have no "experts", "well-respected" bloggers, authors, etc. to waste time "following".

Process is worlds apart and vastly more important than outcome, because an outcome can (and usually is) the result of a plethora of factors unseen, unknown, and unknowable. Outcome is often nothing more than luck (but don't tell that to the overconfident).

If you doubt the power of process over outcome, just look at the many 2008 crisis threads here. The tide went out. Many were naked.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by grabiner » Sun Mar 04, 2018 5:17 pm

nedsaid wrote:
Sun Mar 04, 2018 12:38 am
grabiner wrote:
Sat Mar 03, 2018 8:00 pm
I consider the last paragraph to be one of the most important parts of my IPS, and one I recommend for others:
This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change in the statement at that time.
Grabiner, this is excellent. Too many people think that once written that their IPS is like the 10 Commandments coming down with Moses from Mt. Sinai. It seems to be written in stone and not to be changed. The idea is to get your thoughts on paper and to have a written investment plan, it is not meant to be an immutable document.
And I have changed the IPS several times, using both rules. In 2013, when I bought a home, that was a substantial change in my financial situation, so I changed my asset allocation at the same time. In January 2015, I decided to start reducing my stock allocation as retirement became closer, but since this was not a change in my financial situation, I reviewed the change in April 2015 and only then bought more bonds in my retirement account.
Wiki David Grabiner

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by itstoomuch » Sun Mar 04, 2018 5:29 pm

Mine is pretty simple:
"Protect core assets and control expenses so that FundingRatio>1.1 and reasonably into the future"
"Avoid losing money in Discretionary Accounts. Losing may be short-term and can be a strategy for longterm appreciation"
"Diversify assets to have multiple income streams, may or may not be correlative to one another." ie multiple rentals, annuities.
That's about it.
YMMV :sharebeer
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by dratkinson » Mon Mar 05, 2018 6:16 pm

2015 wrote:
Sat Mar 03, 2018 10:35 am
I confess to having engaged in Simplicity Heresy in that my IPS is probably (IIRC) about 8 pages long. I was greatly influenced by a confluence of writers outside the fields of economics, investing, and personal finance regarding the dangers of confusing outcome with process in decision-making. I wanted to ensure I didn't conflate luck, of which life is comprised greatly, with skill. Having gone through this exercise a few years ago, I'm now in the position to pare down or even eliminate the IPS as I almost never have a need to even refer to it anymore.

My IP is the only area in my investing life where lethargy bordering on sloth hasn't existed.
I agree the supporting documentation is good to have as a reminder of "why" we invest as we do.

I agree a shorter IPS is desirable to provide a quicker overview of the "how" we invest process. I believe my IPS is too long, also.

What to do? I've slowly been stripping the "why" out of my IPS to leave only the "how". But the "why", so it will not be forgotten, is moved to a "supporting documents" section. With a little luck and a few more reviews I may get my IPS to fit on a 5x8 index card.



My IPS is in the first textbox on the first sheet of my investment tracking spreadsheet. I'm gradually winnowing it to contain only the "how".

My "why" supporting documents section is in a second textbox, below the first, on the same sheet, so it will not be forgotten.



An automated IPS. Several years back, a poster noted his IPS was so simple it could be automated, and provided the human-executable pseudocode to do so. That got me to thinking: I could probably do something like that in Excel.


Today, so I don't forget, most of my IPS has been automated in my Excel spreadsheet.

--Sheet:Target AA. Sets my desired AA (by fund) and rebalance bands.

--Sheet: Home, Rebalance, TLH. Compares my current AA to target AA and flags (conditional formatting) anything that is out of balance, or when a TLH opportunity exists.

--Several non-written IPS actions are based on "time of the year", like planning for tax withholding. So checks are built-in to test for correct month and trigger checklist reminders of how I did something in the past. Saves me the need to reinvent the wheel.

Example: Excel tests for "January" and triggers a reminder to plan taxes for the new year.
=IF(MONTH(NOW())=1,"January: Old year tax reporting, new year investment/tax planning. See notes.","")

The associated "notes" are in an Excel comment attached to the cell containing the test for January. The notes in the comment are a checklist of actions to be performed.

In operation, the January-test cell is blank for the majority of the year (but shaded light gray so I know something is there so I do not delete it). But when January rolls around, Excel pops up the reminder (can't miss conditional formatting: yellow background, red font) that I need work on January's actions. So I read checklist notes in the comment and perform the required actions to plan my taxes for the new year.

As they say in the missile career field, "It so simple a monkey could do it: read a step, do a step, eat a banana."


Example. Another time-based check is in October and reminds me of the checklist steps to double-check that my tax-withholding is on track for the year.


Less worry. Before automating my IPS, I use to worry a lot that I would miss doing something important. Now I worry much less.

And even though I don't review my IPS that often, it gets executed by Excel each time I open my investment tracking spreadsheet. So at least one of us is paying attention. :)
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by 2015 » Mon Mar 05, 2018 9:31 pm

I'd be the first to agree my IPS is entirely too long. But I did so strategically. I wanted to engage in the process of mulling over all of my thinking on all aspects of my personally crafted financial philosophy in advance of when such thinking was needed (e.g., a severe bear market). This way, I could ignore all the shiny, metal objects dangling, such as the latest Bogle "forecast", academic "study", "expert" opinion, Pfau, Larry, or Moe post, and all the rest of the noise. The only time I made any changes later was after being influenced by reading outside the fields of investing, economics, and personal finance. For example, Charlie Munger's philosophy on the importance of mental models on decision-making in all aspects of life had a profound impact on how I view risk, complexity in general, and the impact of systems on everything from investing to career choices to who to marry.

Having gone through the above exercise, my electronic IPS has been gathering digital dust as I have no need to refer to it anymore. It's length these days is due more to sloth than anything else. A test of said IPS came during February's market volatility as prediction threads were bouncing around here like balls in a pinball machine and I failed to so much as glance up.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by itstoomuch » Mon Mar 05, 2018 9:37 pm

itstoomuch wrote:
Sun Mar 04, 2018 5:29 pm
Mine is pretty simple:
"Protect core assets and control expenses so that FundingRatio>1.1 and reasonably into the future"
"Avoid losing money in Discretionary Accounts. Losing may be short-term and can be a strategy for longterm appreciation"
"Diversify assets to have multiple income streams, may or may not be correlative to one another." ie multiple rentals, annuities.
That's about it.
YMMV :sharebeer
Forgot #one, #two:
Don't get too greedy.
Never become too attached and rigid nor too distant and flexible
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by Sandtrap » Mon Mar 05, 2018 10:48 pm

itstoomuch wrote:
Mon Mar 05, 2018 9:37 pm
itstoomuch wrote:
Sun Mar 04, 2018 5:29 pm
Mine is pretty simple:
"Protect core assets and control expenses so that FundingRatio>1.1 and reasonably into the future"
"Avoid losing money in Discretionary Accounts. Losing may be short-term and can be a strategy for longterm appreciation"
"Diversify assets to have multiple income streams, may or may not be correlative to one another." ie multiple rentals, annuities.
That's about it.
YMMV :sharebeer
Forgot #one, #two:
Don't get too greedy.
Never become too attached and rigid nor too distant and flexible
+1
Keep it simple and "user" or "newbie" friendly.
I originally wrote my IPS for me to follow, then edited it for others to follow.
An IPS is also for one's "hares" for when you are gone.
j :D

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by randomizer » Tue Mar 06, 2018 12:26 am

Mine currently has 82 sentences, but some of these are a short-term "to do" list and as I achieve the objects I delete those sentences. By the time my mortgage is paid off (about 5 or 6 years from now) I expect it to be about half as long as it is now.

The most important bits are at the top under the heading "Values" — these are basically the bits of the Bogleheads Philosophy™ that lie at the heart of it all:
Simple is good (three-fund is good).
Keep costs low (passive index funds).
Diversity is good (three-fund, preferring total market funds).
Keep taxes low (recapitalize dividends [applicable in Europe]).
Stay the course (don't change AA willy-nilly; rebalance when things head south).
Take the emotions out (stick to the IPS, don't market time).
87.5:12.5, EM tilt — HODL the course!

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by AtlasShrugged? » Tue Mar 06, 2018 9:27 am

Northernboy....Not sure if this will help you, but my IPS is an excel workbook with a heck of a lot of tabs and reports. Below are examples taken directly from my IPS.

Tab 1: The Mission

One: Debt will not dominate our lives. We learned harsh lessons about debt in our married life together. Debt is a thing to be avoided. We will attempt to live below our means our entire lives
Two: The Financial Mission of A & B is to obtain financial autonomy, and a retirement that is worry-free. Our life should be comfortable, not extravagant. We do not want to be a burden to our children, or to society.
Three: It is highly likely that either A or B will require assisted living, or a stay in a nursing home for up to four years. Nobody likes that, but the statistics are what they are. There is a 70% probability that one of us will require long term care, and a 50% probability that we will both require long term care. Our financial plan will account for four years of assisted living, home healthcare or (potential) nursing home expenditures for either A or B, assuming an annual cost of 150K annually.
Four: If possible, we want to leave assets to our sons, provided our original mission of financial autonomy and not being a burden to anyone else is achieved.
Five: In order to achieve this, our minimum goal is to have a retirement portfolio of 1.5MM, in a combination of tax deferred accounts (401K, Roth IRA) and taxable investment accounts. A retirement portfolio of 1.5MM allows for a 4% withdrawal rate that is sustainable for 30 years with a 95% probability of success on a monthly budget of $5,000 (in 2015 dollars).

Tab 3: The Plan

How do we achieve financial autonomy and independence, and a worry-free retirement?

1 First - Live Below Your Means
2 Eliminate debt, carry no revolving balance on any credit card
3 Max out the 401K through BigCorp with Fidelity over time
4 Contribute to our Roth IRAs at Wells Fargo (B) and Fidelity (A)
5 Open a Fidelity Account and invest in index funds for a taxable account
6 Asset allocation (pre-retirement): A's 401K will have an 85/15 equity/bond allocation until age 50. International stocks will be 25% of the
portfolio. A's 401K & Roth IRA will be comprised of index funds from Fidelity.
7 Starting at age 51 (in 2017), allocation will start shifting to bonds via changes in contributions and/or annual rebalancing (if needed) in ~2%
increments. The eventual goal is to have a 60/40 split of equities and bonds by age 62. The schedule is outlined in Table A: Implementation of
glide path. A will use 401K contribution changes and Roth IRA contribution changes to achieve target allocations. The target allocation can
be hit at any point in the year, it does not have to be January 1. Example: When I turn 50, I have from April 3, 2016 through April 1, 2017 to
drift to my new allocation; when I turn 51 on April 2, 2017, I will drift to the Target 52 allocation no later than April 1, 2018. The purpose of
the glide path is to steadily reduce exposure to dramatic losses in value as retirement approaches (Specifically, the sequence of returns risk).
8 At age 55, A will file for his pension from MegaCorp. The monthly payment will be ~350 dollars. The entire balance of the check will be
used toward paying down the principle of the mortgage. This will bring the mortgage balance to ~79,000 by the time A is age 62. At that
time, the house can be paid off in a lump sum by either a withdrawal from the 401K, or the Roth IRA.
9 At retirement (anytime between age 67 - 70), implement the bucket system. In this system, A will have 2-3 years of RMDs in cash, about 5-7
years of RMDs in bonds, and the remainder in equities.
10 In retirement, have 2-3 years of RMDs in a money market. The reason is that you do not want to have to sell equities at a depressed price. You
need to have at least 2 years of breathing room.
11 In retirement, have 5-7 years of RMDs in bonds. The reason is that you do not want to have to sell equities at a depressed price. You need to
have up to 5-7 years of breathing room. This approach also 'smooths' out annual RMDs

I have a table in this tab that outlines the specific percentages of each index fund over time.

In other tabs, I do the following:

Summary Tab: This has charts of portfolio composition, and a line chart of portfolio performance over time (by month ending balances in another tab).
Detail tab: This lists all of the index funds and holding that we have. I update that on Sunday mornings.
SSA tab: I have a whole tab dedicated to SSA. I keep SSA statements for my DW and myself (as an embedded PDF)

It sounds like a lot, and I suppose it is. It took me the better part of a year to compile. As I learn new things, I incorporate them. I write down my ideas in an 'Ideas to Explore' tab. Then I research them. You'd be surprised how many ideas you'll consider over time. I certainly was.

Good Luck! The last thing I will leave you with. The first thing I see in my IPS is this classic advice from Jack Bogle: Stay the course.
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by WoodSpinner » Tue Mar 06, 2018 11:15 am

cfs wrote:
Fri Mar 02, 2018 2:52 pm
I have a single page RETIREMENT Policy Statement. Here are two good articles from Christine Benz from Morningstar on how to create the documents.

How to Create an Investment Policy Statement [Morningstar]: http://www.morningstar.com/articles/808 ... ement.html

How to Create a Retirement Policy Statement [Morningstar]: http://www.morningstar.com/articles/808 ... ement.html

Please, keep it SIMPLE. My signature applies, y gracias por leer ~cfs~
If you are interested in a slightly more detailed template, check out this post. I combined my Retirement and Investment Policy Statements.

An additional benefit is that it serves as a document I can review with my DW to help her come up to speed with our Finances and be able to take over the helm if needed. For instance, we made a large contribution to a DAF this year which led to a spirited discussion on charitable giving vs. leaving money to our heirs. We pulled out the RPS and looked at the priorities section and confirmed the decision.

Has worked for us ....

WoodSpinner

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by pkcrafter » Tue Mar 06, 2018 12:53 pm

An ISP is a reminder and an aid to keep you on your plan. It should be written down and viewed as a contract. More importantly, it is an emotional pillar. For that reason you must make a contract that you can keep, which means you have to fully understand your behavior under stress in order to continue to hold your chosen stock allocation when tested in a violent market fall. Questionnaires really do not provide an accurate answer to this, and furthermore, new investors usually take a risk test when they are eager to join in on a rising market. This is also a time where overconfidence (behavior pitfall) will be encouraged. 'Tis a dilemma, so when starting out if you have to err, do it by starting with somewhat less equity. You can always up it after being tested by the market.

Behavioral Pitfalls

https://www.bogleheads.org/wiki/Behavioral_pitfalls

Investors need to be aware of common pitfalls and perhaps note some of them in their ISP.



Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by 2015 » Tue Mar 06, 2018 2:14 pm

pkcrafter wrote:
Tue Mar 06, 2018 12:53 pm
An ISP is a reminder and an aid to keep you on your plan. It should be written down and viewed as a contract. More importantly, it is an emotional pillar. For that reason you must make a contract that you can keep, which means you have to fully understand your behavior under stress in order to continue to hold your chosen stock allocation when tested in a violent market fall. Questionnaires really do not provide an accurate answer to this, and furthermore, new investors usually take a risk test when they are eager to join in on a rising market. This is also a time where overconfidence (behavior pitfall) will be encouraged. 'Tis a dilemma, so when starting out if you have to err, do it by starting with somewhat less equity. You can always up it after being tested by the market.

Behavioral Pitfalls

https://www.bogleheads.org/wiki/Behavioral_pitfalls

Investors need to be aware of common pitfalls and perhaps note some of them in their ISP.



Paul
Excellent post, Paul. You explained it many times better than I did. :beer

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Re: IPS – looking for details from Nisiprius, Livesoft and others

Post by cfs » Tue Mar 06, 2018 5:17 pm

cfs wrote:
Fri Mar 02, 2018 2:52 pm
. . . I have a single page RETIREMENT Policy Statement. Here are two good articles from Christine Benz from Morningstar on how to create the documents . . .
WoodSpinner wrote:
Tue Mar 06, 2018 11:15 am
. . . If you are interested in a slightly more detailed template, check out this . . .
Thank you for the link, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

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