Amazing how much your IPS can de-stress your life

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simple man
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Amazing how much your IPS can de-stress your life

Post by simple man » Wed Jan 17, 2018 4:17 pm

I am amazed how much my life has changed and de-stressed since I have found my IPS and agreed to live by it. For newcomers, my steps were as follows:

1. Truly accept that no one, including you and your brother in law, can predict the market long term. This is harder than it sounds.
2. Come up with an Investment Policy Statement (IPS) that works for you. See the wiki for all the info you need on the IPS. As stated here often, it has to be something you can stick to, even when the market falls. Rule of thumb is you would be ok if the market falls 50%. For me, I had to get down to a 50/50 balance. BUT, I really can sleep well at night without worrying.
3. Be truly willing to stay the course, no matter what the market does.

Assuming you can stay the course, you do NOT care what the market does and checking once a year to rebalance ends up being all you need to do. All that media and market watching you do on market issues goes away and you get all that time back. Also, no more emotional ups and downs - either because of market turmoil or talking heads spinning you up.

In hindsight, I am so much more relaxed re my holdings than I used to be. I encourage all to follow the BG path! Just wanted to share. :sharebeer

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saltycaper
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Re: Amazing how much your IPS can de-stress your life

Post by saltycaper » Wed Jan 17, 2018 4:31 pm

simple man wrote:
Wed Jan 17, 2018 4:17 pm

Rule of thumb is you would be ok if the market falls 50%.
And what if the market falls more than that? I would plan for that too.
Quod vitae sectabor iter?

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Will do good
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Re: Amazing how much your IPS can de-stress your life

Post by Will do good » Wed Jan 17, 2018 4:39 pm

:sharebeer

If your IPS includes 2-4 years of expenses in cash/CD you are pretty safe (It's even better if you have a job.), anything 50/50 and 2-4 years of cash/CD can't protect, we have a much bigger problem.

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Will do good
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Re: Amazing how much your IPS can de-stress your life

Post by Will do good » Wed Jan 17, 2018 4:39 pm

Deleted

simple man
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Re: Amazing how much your IPS can de-stress your life

Post by simple man » Wed Jan 17, 2018 4:43 pm

Thanks Salty Caper! I guess if it falls more than 50%, I consult my IPS, rebalance and use it as a buying opportunity!!! (at least that is what I hope I will do) :D

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saltycaper
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Re: Amazing how much your IPS can de-stress your life

Post by saltycaper » Wed Jan 17, 2018 5:03 pm

Yes. We hope that is what we will do, which implies we hope that is what have the ability to do.

Alternative plans are possible, and perhaps even necessary for those with very high equity allocations.
Quod vitae sectabor iter?

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DaftInvestor
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Re: Amazing how much your IPS can de-stress your life

Post by DaftInvestor » Wed Jan 17, 2018 5:25 pm

The other thing I like about the IPS is its a good way of agreeing with your spouse that you share the same plan and goals.
OP: Agree with everything you said - the only thing I do differently is I do re-balance more than once a year (Since I'm always adding more money I look at allocation amounts monthly and make any new-money adjustments accordingly to get back to my AA - if I am off by a large margin I might also make non-new-money shifts in non-taxable accounts).

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Cyclesafe
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Re: Amazing how much your IPS can de-stress your life

Post by Cyclesafe » Wed Jan 17, 2018 5:32 pm

I completely agree.

A well thought out IPS is evergreen, valid through thick and thin. If one is thinking of timing the market, IOW's making a change not delineated in quantity or timing by your IPS, then one needs to re-think their IPS.

In December I rebalanced from 57% equity to 52% equity as dictated by my IPS. I'm now at 53.5% plus, but will hold off until I reach my rebalancing band at 57% again. The way the market is going, that might be in February! Or not!

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Re: Amazing how much your IPS can de-stress your life

Post by RadAudit » Wed Jan 17, 2018 5:35 pm

OP, I am happy for you. Truly, I am. Hope it works out.

I've read books., run the numbers, checked the numbers against rules of thumb, developed an AA, set a SWR and wrote an IPS. Still worry. Some of us are just plain old worriers with no good reason. But you may be right. I probably worry less now that I've been through that process.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The Calvary isn't coming, kids. You are on your own.

InvestInPasta
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Re: Amazing how much your IPS can de-stress your life

Post by InvestInPasta » Wed Jan 17, 2018 7:33 pm

simple man wrote:
Wed Jan 17, 2018 4:17 pm
I am amazed how much my life has changed and de-stressed since I have found my IPS and agreed to live by it. For newcomers, my steps were as follows:

1. Truly accept that no one, including you and your brother in law, can predict the market long term. This is harder than it sounds.
2. Come up with an Investment Policy Statement (IPS) that works for you. See the wiki for all the info you need on the IPS. As stated here often, it has to be something you can stick to, even when the market falls. Rule of thumb is you would be ok if the market falls 50%. For me, I had to get down to a 50/50 balance. BUT, I really can sleep well at night without worrying.
3. Be truly willing to stay the course, no matter what the market does.

Assuming you can stay the course, you do NOT care what the market does and checking once a year to rebalance ends up being all you need to do. All that media and market watching you do on market issues goes away and you get all that time back. Also, no more emotional ups and downs - either because of market turmoil or talking heads spinning you up.

In hindsight, I am so much more relaxed re my holdings than I used to be. I encourage all to follow the BG path! Just wanted to share. :sharebeer
Just out of curiosity, in what year did you write down your IPS?
Maybe in the last 8 years of ever growing market? ;)
When studying English I am lazier than my portfolio. Feel free to correct my English and Investng mistakes.

bi0hazard
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Re: Amazing how much your IPS can de-stress your life

Post by bi0hazard » Wed Jan 17, 2018 7:55 pm

Do y'all count Emergency fund in your IPS.

mortfree
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Re: Amazing how much your IPS can de-stress your life

Post by mortfree » Wed Jan 17, 2018 8:34 pm

Easy to write the IPS in today’s market.

NYCguy
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Re: Amazing how much your IPS can de-stress your life

Post by NYCguy » Wed Jan 17, 2018 9:08 pm

I wrote my initial IPS over 15 years ago. It was one of the smarter investment decisions I’ve made.

I review it frequently. Provided me an excellent roadmap to prosper during the financial crisis.
If your out-go is greater than your income, your upkeep will be your DOWNFALL.

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resurgemus
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Re: Amazing how much your IPS can de-stress your life

Post by resurgemus » Wed Jan 17, 2018 9:12 pm

I like that my IPS steers me away from fear and greed.

a) I have to read my IPS before I move any money in or out of any particular fund
b) Even after rebalancing (TSP only) on my birf-day at the end of 2017, I'm still slightly underweighted in Fixed Income (per my IPS)
c) I'm going to purchase Fixed Income in my Roth this year, regardless of what I think the market is going to do

Without it, I'd be trying to figure out where to put money this year... Is the market going higher? Is a correction on the horizon? Worse, a crash?

Doesn't matter. And I'll sleep well at night.
Domestic 42%, Int'l 21%, REIT 7%, Fixed 30%

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Sandtrap
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Re: Amazing how much your IPS can de-stress your life

Post by Sandtrap » Wed Jan 17, 2018 9:18 pm

DaftInvestor wrote:
Wed Jan 17, 2018 5:25 pm
The other thing I like about the IPS is its a good way of agreeing with your spouse that you share the same plan and goals.
OP: Agree with everything you said - the only thing I do differently is I do re-balance more than once a year (Since I'm always adding more money I look at allocation amounts monthly and make any new-money adjustments accordingly to get back to my AA - if I am off by a large margin I might also make non-new-money shifts in non-taxable accounts).
+1
Being on the "same page" with DW is over half the "de stressing".
I reviewed my IPS with her and we agreed on these protocols (may be helpful to others). .
1
No fund or shares sold without knowledge of the other.
2
Either one has veto power over any transaction, does not take 2 votes.
3
Funds can be purchase by myself as long as within IPS guidelines I've written (since I manage the portfolio myself).
4
No "freaking out". (this means no panicking, no rash decisions, no fund sales at 2:00 a.m.)
5
Annual withdrawals are variable and agreed upon per budget.

j :D
Last edited by Sandtrap on Wed Jan 17, 2018 9:18 pm, edited 1 time in total.

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resurgemus
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Re: Amazing how much your IPS can de-stress your life

Post by resurgemus » Wed Jan 17, 2018 9:18 pm

bi0hazard wrote:
Wed Jan 17, 2018 7:55 pm
Do y'all count Emergency fund in your IPS.
I have three separate "buckets" or whatever they'd be called.
Tax-advantaged (TSP & Roth) -- It's 15+ years until this is available
Long-term savings (taxable SP500 and ST Bond funds) -- if I think I need it in five years or less, it gets moved out of the SP500
Savings (HY Savings and a few CDs) -- I guess this is the "emergency" fund. Or down payment fund. Or whatever. I've never withdrawn from it (yet)

It's technically all "emergency" funds, depending on the severity and duration of the emergency. I don't count my primary checking and savings in my IPS. Checking is for bills and expenses, and the savings attached to the same account is a buffer for a bad month.

I guess, per my IPS I could use my HY savings for whatever... I'm about to take a huge pay cut (voluntarily), and that money will be there if I need it. The Long-term savings and tax-advantaged accounts are off-limits, though. Unless the stuff hits the fan.
Domestic 42%, Int'l 21%, REIT 7%, Fixed 30%

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Johnnie
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Re: Amazing how much your IPS can de-stress your life

Post by Johnnie » Wed Jan 17, 2018 10:16 pm

simple man wrote:
Wed Jan 17, 2018 4:17 pm
I am amazed how much my life has changed and de-stressed since I have found my IPS and agreed to live by it.
Amen, Brother! I was lost in the wilderness of timing and thinking I could "figure this thing out" until very late in the game, but Paul Merriman's Marketwatch articles caught my imagination and put me on the path to Bogletude and low-stress peace of mind. See my signature line below for my post-enlightenment investment philosophy.
"I know nothing."

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Alexa9
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Re: Amazing how much your IPS can de-stress your life

Post by Alexa9 » Wed Jan 17, 2018 10:19 pm

People are getting caught up in the Bull Run and forgetting that 2008 was only 10 years ago.

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randomizer
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Re: Amazing how much your IPS can de-stress your life

Post by randomizer » Wed Jan 17, 2018 10:22 pm

I have an IPS and I stick to it, but I still wind up thinking about it a lot.
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BogleMelon
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Re: Amazing how much your IPS can de-stress your life

Post by BogleMelon » Wed Jan 17, 2018 10:23 pm

mortfree wrote:
Wed Jan 17, 2018 8:34 pm
Easy to write the IPS in today’s market.
"In time of peace prepare for war." - Publius Flavius Vegetius Renatus
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

MnD
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Re: Amazing how much your IPS can de-stress your life

Post by MnD » Wed Jan 17, 2018 10:47 pm

One of my major de-stressors was the switch years back to mirroring all-cap world index investable market for equities.
No more hand-wringing over the "right" US/international allocation and for various tilts.
No more desperate seeking for international small cap emerging market value funds. :mrgreen:
Just buy the haystack! :beer

I have a one-index solution for equities and a 2-fund solution for fixed income.
While I can't yet simplify down to 3 funds, its just math to approximate the above and will be consolidating funds big-time when I retire later this year.

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Re: Amazing how much your IPS can de-stress your life

Post by TwstdSista » Thu Jan 18, 2018 5:03 am

I've been re-balancing our allocations since November. I had a plan, started to implement it, read some info. Then changed my plan and started to implement that. Then I read more, started to implement again, and ran into the 30 day rule. Ugh.

Finally created an IPS. I have two sets of numbers (both totaling 100%) -- one set of numbers for retirement funds, and one set of numbers for the entire portfolio including our very health emergency fund. The numbers aren't perfect between the two, but very close and well within 5% bands.

I'll finish up my efforts in the first few days of February, when the last of my 30 day rules expire. But my anxiety over everything really is much less. We're older than we were the last time I truly looked at our numbers, so ultimately this did need to happen.

Lessons learned.... (and fwiw, we're are moving completely to the 3 fund portfolio, before we were maybe only half way there)

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Re: Amazing how much your IPS can de-stress your life

Post by J295 » Thu Jan 18, 2018 7:48 am

We have had an IPS for quite some time, and yes it is a nice foundation to work from.

I will note, however, that the biggest de-stressor for me is a long-term rising equity market.

We have been investors since 1979, and thus have experienced many turbulent times since then, some of which were rapid and material declines. Stay the course and following the IPS during some of those moments can be challenging. On the flipside, at least for us, following the IPS in a rising market is easy street.

Rather random… But just as an FYI our IPS requires a 90 day cooling off period before we can implement any change. The idea is to minimize the chances that fear or greed might sneak its way into our behaviors

InvestInPasta
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Re: Amazing how much your IPS can de-stress your life

Post by InvestInPasta » Thu Jan 18, 2018 7:09 pm

Can someone post an example of his IPS?!
Just to have an idea of what an IPS looks like.
When studying English I am lazier than my portfolio. Feel free to correct my English and Investng mistakes.

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House Blend
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Re: Amazing how much your IPS can de-stress your life

Post by House Blend » Fri Jan 19, 2018 9:36 am

InvestInPasta wrote:
Thu Jan 18, 2018 7:09 pm
Can someone post an example of his IPS?!
Just to have an idea of what an IPS looks like.
Try the wiki:
https://www.bogleheads.org/wiki/Investm ... _statement

Dandy
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Re: Amazing how much your IPS can de-stress your life

Post by Dandy » Fri Jan 19, 2018 5:14 pm

I think making an IPS when you and the market are calm is a very good idea. I think in retirement when most if not all of human capital is gone and you have a healthy withdrawal and only a modest income floor a market plunge may not be easy to handle despite the IPS.

Living in that personal and market condition can be a lot different than people think. Market is dropping, portfolio is dropping and you are withdrawing - still feel comfortable re balancing? Maybe at first, lets say market drops further and you take further withdrawals and now you start to feel your "safe" fixed income is looking kind of inadequate and the prospect of further depleting it to re balance starts to feel not right. You are still looking at 15 or 20 years of retirement and the pot is all you've got. Oh, maybe you have some unexpected expense e.g. roof, car, health -- not many have the will to continue to follow their well thought out plan - unless of course they have built in some steps related to the above conditions. Not all fear is bad - it is managing it that is the real challenge.

A good IPS is important but you do need to know when to suspend or change it. It is great if having an IPS de-stresses just remember it is a plan not the be all and end all plan.

visualguy
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Re: Amazing how much your IPS can de-stress your life

Post by visualguy » Fri Jan 19, 2018 8:56 pm

My IPS goes only part of the way in terms of de-stressing... The problem is that it's based on a strategy which is implicitly based on the past behavior of the markets (well, maybe conveniently ignoring the great depression...)

Even the double whammy of 2000 and 2008 took a lot of people (including myself) by surprise. Could something double as bad or double as long happen? Sure, and it could have happened back then if the crises had been managed less competently. History may rhyme but not repeat, so who knows what the future holds. The longer the time horizon, the more uncertain it gets.

InvestInPasta
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Re: Amazing how much your IPS can de-stress your life

Post by InvestInPasta » Sat Jan 20, 2018 4:46 am

Dandy wrote:
Fri Jan 19, 2018 5:14 pm
I think making an IPS when you and the market are calm is a very good idea. I think in retirement when most if not all of human capital is gone and you have a healthy withdrawal and only a modest income floor a market plunge may not be easy to handle despite the IPS.

Living in that personal and market condition can be a lot different than people think. Market is dropping, portfolio is dropping and you are withdrawing - still feel comfortable re balancing? Maybe at first, lets say market drops further and you take further withdrawals and now you start to feel your "safe" fixed income is looking kind of inadequate and the prospect of further depleting it to re balance starts to feel not right. You are still looking at 15 or 20 years of retirement and the pot is all you've got...
There are certain things that cannot be adequately explained to a virgin either by words or pictures. Nor can any description I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.- Fred Schwed

:wink:
When studying English I am lazier than my portfolio. Feel free to correct my English and Investng mistakes.

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AtlasShrugged?
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Re: Amazing how much your IPS can de-stress your life

Post by AtlasShrugged? » Sat Jan 20, 2018 6:50 am

simple man....I agree, having a documented IPS is huge. And yes, it takes a lot of worry off the table. I think that is because when you have an IPS, you have thought through a number of scenarios, and you have figured out 2-3 things to do in each scenario. It makes us feel more in control of our destiny, which in turn, reduces stress.

The challenge for me is to draw the line between 'evolution' and 'tinkering'. When times and circumstances change, you need to evolve. Example: Rebalancing bands, when equities rise a lot. Recently, I made a fairly substantive change because my thinking changed, and I have new circumstances to consider. Here is what I mean by this.

In my Roth, I had five index funds: Mid-cap, Small-cap, REIT, Int'l and bond. In setting up my Roth in the past, my reasoning was that I needed to take higher risk for a greater reward....because I started saving for retirement relatively late. And low cost index funds had the least 'friction'. So I have been executing this for a few years. All fine and good. And it has been working quite nicely (Thanks, Mr. Market!). That said, directing contributions on a weekly basis into five funds and maintaining a fairly strict allocation can be a chore. Even with a spreadsheet. My wife, who is the family CFO, doesn't really know beans about investing, and has little interest, and definitely does not know excel. I exchanged my mid-cap, small cap and REIT index funds for one total market fund earlier this month. I now have a three fund portfolio for my Roth. Why? If I die, it will be easier for her to manage. The instructions are simple: Put 30% in Total Market, 30% in Total Int'l and 40% in Total bond....and you're done. Also lessens my hassle factor. The price? I am giving up a token amount of return over the long haul.

In my example above, moving to simplicity and ease of management, I call that evolution of my IPS. Life happens. Circumstances change. My thinking about things change. New academic papers are published exploring new topics (or old ones). In my case, I passed the 'half century' mark and am realizing that I cannot count on time that I do not know that I have.

The toughest part of having an IPS, I have found, is to resist the urge to 'tinker' and 'Tweak'. I wonder if this has been the experience of other Bogleheads? How do they draw the distinction between 'evolution' and 'Tinker'?
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: Amazing how much your IPS can de-stress your life

Post by IlliniDave » Sat Jan 20, 2018 8:58 am

bi0hazard wrote:
Wed Jan 17, 2018 7:55 pm
Do y'all count Emergency fund in your IPS.
I don't. I don't consider my emergency fund an investment per se. Same with my house. My IPS is only a component of my overall financial plan.

Re OP: for me, having a plan (or policy) is important. It's just my nature. I don't keep as detailed an IPS as many do, mine's more of an overarching philosophical guidance than a detailed set of instructions. Nevertheless on occasions I feel the need to "do something", it is the tool nervous or greedy current me uses to curb impulses and avoid actions a calmer past me thought inadvisable.

It's probably about time for me to revisit/revise mine. Since the last time I looked at it I've hit some milestones w.r.t my degree of potential FI, and I'm inside of two years out from the early side of my retirement date window. It will probably read something like:

1. Maximize savings consistent with present lifestyle spending, and within that prioritize maximizing tax-advantaged options.
2. All new savings -> bonds (bond index in 401k, muni fund in Vanguard taxable account)
3. Rebalance A/R to keep stock AA <= 70ish
4. Can rebalance stock-> bonds any time I'm nervous down as far as 50%. To go below 50% via rebalance, I have to wait/consider it for 30 days
5. Revisit/revise if SP500 experiences 20% or greater decline.
6. Revisit/revise 3-6 mos prior to giving retirement notice to employer.

So in the big picture I'm currently maintaining the AA I want in the early years of early retirement, but I've given myself permission to retreat to a moderately less risky position, and a lot of flexibility about how to do that. This is partly due to the proximity of retirement and partly in recognition of high stock valuations in the US. Yes, I'm an imperfect boglehead. And maybe it's bad policy but I don't worry too much about spelling out rules about how my equity is divided between total US (and SP500 TLH partner), developed Total Ex-US, and EM. Assuming no TLH considerations I typically look at 3-year returns and sell a little more from the ones with the strongest returns and a little less (or none) from the weaker performers.
Don't do something. Just stand there!

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