Post your Investment Policy Statement IPS here

[LH]

I was interested in what Bogleheads Investment Policy Statements look like. I have done a couple over the years, just off written on printed out pdf files. It is really pretty junky, and does not seem all that meaningful.

http://im.morningstar.com/im/InvestPolicyWS.pdf

Is one of them. Its helpful to some extent, but I always wonder if thats all there is. I was wondering if some people could post thier IPS statements here, if they have them in a handy format, take out the net worth figure and anything personal, but leave in everything else, so we could get a sense of what other Bogleheads are doing IPS wise.

Basically, I want something to mimic, but would also just like to see the range of whats out there : )

Cheers,

LH

[NAVigator]

It doesn't get much better than what is described in the Wiki by Sunny.

http://www.bogleheads.org/wiki/IPS#Real-World_IPS

I modeled my IPS on this.

Jerry

[bob90245]

Mine is just my detailed net worth statement in Excel that includes all my securities held in both dollar amounts and percentage of total. On the lower-right corner, I have some formula cells that calculates my rebalance bands. I monitor (once a week) when any of those exceed their lower or upper bounds. Out of 52 weeks in a year, I take action maybe a handful of times.

[leonard]

My IPS assumptions are baked in to my excel rebalance/asset allocation spreadsheet.

[DaleMaley]

I did my first IPS about 5 years ago and based it upon Sue Steven's example IPS.

My IPS is not nearly as short and concise as Sunny's.

[VictoriaF]

IPS
1. Assets: 125% equities purchased on margin, the rest is gold.
2. Asset allocation:
- 40% - gold
- 30% - stocks
- 20% - funds
- 10% - other
3. Gold:
- Accelerate purchases as the market momentum propels it to new heights.
- Remember to sell it right before it declines.
4. Stocks:
- Mine Internet boards for hot tips.
- Trust your market timing savvy.
5. Funds:
- Buy the last year's best performing stock fund.
- Replace with the new best performing fund annually.
6. Other:
- Play money.

Victoria

[Noobvestor]

Goals: relative simplicity, tilts that make me feel *more* comfortable than holding just TSM and slightly more bond 'protection' to balance volatility.

::total::
70/30 Equities/Fixed Income (Age in Bonds +/- 5)

::equities::
50/50 International/US Equities (Global Market Weights +/- 10)
50/50 Developed/Emerging w/in International (Emerging Tilt)
Significant Small & Value Tilts (Up to 50/50 with TSM)

::fixed::
50/50 TIPS/Total Bond Index (+/- 10)

[Mel Lindauer]

IPS
1. Assets: 125% equities purchased on margin, the rest is gold.
2. Asset allocation:
- 40% - gold
- 30% - stocks
- 20% - funds
- 10% - other
3. Gold:
- Accelerate purchases as the market momentum propels it to new heights.
- Remember to sell it right before it declines.
4. Stocks:
- Mine Internet boards for hot tips.
- Trust your market timing savvy.
5. Funds:
- Buy the last year's best performing stock fund.
- Replace with the new best performing fund annually.
6. Other:
- Play money.

Victoria

[BlueEars]

Victoria, don't you think you are being a bit too conservative at your age? On the other hand, I did notice there was that mention of "play money". I think you should detail that one as it is too vague.

[Noobvestor]

Victoria, don't you think you are being a bit too conservative at your age? On the other hand, I did notice there was that mention of "play money". I think you should detail that one as it is too vague.

I'm guessing she bets all that on TSM

[Ed 2]

Victoria, don't you think you are being a bit too conservative at your age? On the other hand, I did notice there was that mention of "play money". I think you should detail that one as it is too vague.

huh.

"Play money" maybe like a long term investment??....maybe *.


*[just kidding]

[Ed 2]

Victoria, don't you think you are being a bit too conservative at your age? On the other hand, I did notice there was that mention of "play money". I think you should detail that one as it is too vague.

I'm guessing she bets all that on TSM

you are much faster than me, but the same thinking :lol:

[joe8d]

I don't have an IPS.I do have an Investment Plan.I've always considered a IPS as something an advisor would require from a client.

[555]

Why should I have one?

[LadyGeek]

Following VictoriaF's line of thought: Chuck Norris makes his investment policy statements with a roundhouse kick to the head...

(post responses on that thread if desired)
=============

I set my asset allocations, have budgets, and check my portfolio on a regular basis. Perhaps an IPS is implied, but actually writing one down seems way too complicated. I'd never use it.

[Peter Foley]

This is a bit lengthy because I tie my investment plan into my life plan. It is detailed enough so that my wife can follow this plan in my absence.
It includes withdrawal strategies for our first few years of retirement.

Investment Policy Statement 10-6-2009
Life plan: Our goal is to retire in about two years with sufficient savings to support our plan for living during our post retirement years. Details include 1) Our plan for living during our post retirement years - much like our life today except for avoiding a good portion of Minnesota winters 2) The means of getting there - continuing to max out our retirement savings contributions, 3) Our investment philosophy - using index funds and diversification (an asset allocation while accumulating of 50 percent equities and 50 percent bonds that is rebalanced at least annually), 4) a withdrawal strategy - 3% to 4% per year, 5) a social security strategy - delaying taking social security until age 66.
Investment Philosophy: We would like a well diversified, moderate portfolio. We will manage it ourselves, keeping it simple so that wife can manage it as well as husband. We both will retire from full time work sometime in 2011 or 2012. Over the next five years we will gradually reduce our stock mutual fund holdings and increase our bond holding to the point that bonds = our average age. If we do well enough so that we have no need to take risk we will reduce our equity holdings to 30% of our total investment portfolio. As we retire and have the ability to do so, we will also reduce the number of accounts we have. (See TIRA and SIMPLE conversions)
Investment goal: We will continue to maximize our contributions to our deferred accounts. Our goal is an investment portfolio that will provide about $XX,000 a year in retirement to supplement husband's defined pension. Our target "number" is about $X.XXM, an amount that will allow for a conservative 3.5% withdrawal rate.
What to invest in: Both deferred compensation plans have good low cost options. We will hold bonds in our deferred account up to the asset allocation for bonds. Bonds will be equally divided between stable value funds, bond funds and TIPs. (We will hold some I-Bonds in taxable accounts.) Because husband is older we will hold more fixed assets in husband's account and relatively more equities in wife's account. This will allow for withdrawals from husband's account first, thus limiting required minimum distributions.
Other Strategies: If advantageous to do so, we will do Roth conversions of TIRAs when after we retire. If healthy, we will defer taking Social Security until we reach full retirement age. We will withdraw from taxable accounts before tax deferred accounts unless there is an opportunity to withdraw some tax deferred funds at a relatively low marginal tax rate.
Rebalancing: We will rebalance when our stock/bond asset allocation is off by more than 5% in an up market and 10% in a down market.

Withdrawal Strategies: (First two years of a 5 year plan)
2011: Assumption - wife works full year, husband works half year
No withdrawals, continued deferrals
2012: Assumption - wife works half year in full employment, half year consulting, husband receives pension and may work part time
Taxable Income = ($xx,xxx salary -$xx,xxx deferred contribution) + ($xx,xxx consulting-$xx,xxx SIMPLE contribution) + $xx,xxx defined pension + x,xxx part time work = $xx,xxx
2009 Tax rate schedule >67,900 = 25% < 137,500
Withdrawal from taxable only if needed, cash 1 EE Bond
2013: assumption - both fully retired, begins withdrawals at 3.5% from taxable. Convert TIRAs to Roths.

[woof755]

Why should I have one?

They are nice to have around in years like 2008, so instead of putting all your money in your freezer / mattress, you can look at your IPS and remember that you are investing for 20 years from now, not next month.

Before making a hasty decision, your IPS has already "slept on it."

[patrick]

I may have a slightly different kind of IPS than some others, more focused on the process to choose investments rather than the exact investments chosen. For instance, when Vanguard opened their foreign small cap fund, I moved some assets into it. I don't see that sort of thing as a change in policy, but rather as carrying out the policy to be diversified and minimize costs.

General principles:
1. Keep costs low, preferably by holding low cost index funds for the long term.
2. Active funds are acceptable if my employer plan has severely limited index funds, for small money market balances, and in the rare cases they are cost competitive with index funds.

What not to do:
3. Never try to time the market (whether technical, fundamental, momentum, contrarian, etc.)
4. No individual bonds except treasuries.
5. No individual stocks except company stock bought at a discount which should be sold promptly.
6. No sector funds except REIT.
7. No inverse/leveraged investments, whether directly or through funds that do so.

General asset allocation:
8. Equity portfolio evenly split between US and foreign. Small, value, and REIT tilts will be used but only to the extent they do not significantly increase costs or taxes.
9. Portfolio will stay at 84% stocks while under 250K, reduced to 80% when reaching 250K, and another 4% for each further multiple of 250K. Don't go below 52% stocks.

Rebalancing:
10. Generally try to rebalance with new investments and distributions.
11. Sell to rebalance only on a large deviation from the target and after considering transaction costs and taxes.

Asset allocation targets can change in these circumstances, subject to the guidelines of this IPS:
12. Any tax changes relevant to the portfolio.
13. Joining, leaving, or menu change of employer retirement plan. The rest of the portfolio may need to be redesigned around the limited options of an employer plan.
14. Changes to expense ratios and available funds may lead to switching to a cheaper fund, adding asset classes that become cheaper, and removing asset classes that become more expensive.
15. Changes in the relative size of taxable account, IRA, and employer plan may require switching which asset is in which account.
16. Make a one time change to enact my first plan for the fixed income section of the portfolio, as my current allocation only has a clear plan for the equity side.
17. Avoid changes that would trigger significant capital gains taxes.

[White Coat Investor]

Boy the ones posted here so far make mine look like a novel.

Investing Personal Statement for EmergDoc and Ms EmergDoc
Revised 29 July 2007

Goals:

Our investments will provide an income of $100,000/year (2006 dollars) while still growing at the inflation rate providing us financial independence by June -- 2030. This amount will allow us to have an adequate standard of living upon retirement (allowing for increased travel) and will provide another increase in standard of living to pay for increased medical costs, long-term care insurance, and to fund estate-planning tools when social security becomes available to us at age 62-70.

We will be worth $1 million dollars by June -- 2017.

Savings Goals:

Save at least 20% of our income every year beginning in 2007.

Save at least $30,000 (2006 dollars) per year while in the Air Force.

Save at least $53,000 (2006 dollars) per year after finishing with the Air Force.

We will always max out the tax-sheltered retirement vehicles available to us.

Investments

We will strive to minimize the effects of taxes and expenses on our investment returns.

Our primary investment vehicles will be stock mutual funds and bond mutual funds, preferably within tax-sheltered accounts.

We will also consider the use of individual property investment real estate to meet our goals if careful analysis indicates a reasonable opportunity for profit.

In general, we will favor passively managed investments over actively managed investments.

We will calculate our savings rate and our total return and real return each year.

We will strive to achieve a real return of at least 6% per year, averaged over our investment lifetime.

We will not panic and sell securities due to market corrections.

Home Ownership

We will strive to own our home whenever possible.

We will not spend more than 20% of our income on mortgage payments and property taxes.

We will carefully research both our home purchases and our mortgage options to ensure we obtain the least expensive options available to us.

We will use home equity loans only to improve the home, consolidate other loans, or to invest in guaranteed investments such as money market accounts or government bonds.

The mortgage of the home we are living in will be paid off at the time of retirement.

Spending

We will track our spending at regular intervals to ensure appropriate use of our resources.

We will not use credit to purchase automobiles, appliances, or vacations.

We will use credit only for convenience, mortgages, and safe, fixed-income investments.

Emergency Fund

We will maintain an emergency fund equal to at least 3 months of expenses, but 6 months when combined with directed savings (auto, home etc) (minus taxes, tithing, and savings) in guaranteed investments such as money market funds, short-term bonds, or CDs. We will count this as part of our fixed allocation.

Asset Allocation

Our overall asset allocation will be 75% equity investments and 25% fixed income investments. Investment real estate and our home will not be calculated into this figure. Our emergency fund will be calculated as part of the fixed income. The ratio will decrease gradually to at least 60/40 by retirement.

Our primary asset classes will be domestic stock mutual funds, international stock mutual funds, and US Government bond mutual funds. Other investments to provide diversification may be used. However, at least 1/3 of our equity will remain in non-US investments.

We will tilt the portfolio toward mid-cap and small-cap stocks in an effort to increase returns so long as reasonably priced investments are available, both domestically and internationally

We will tilt the portfolio slightly toward value stocks, both domestically and internationally. This will be maintained by the purchase of specific value stock mutual funds if necessary and so long as reasonably priced investments are available.

We will rebalance our asset allocation as frequently as necessary using the 5/25 rule using new investment money as much as possible. If selling in a taxable account (or selling an investment with significant trading costs) is required to rebalance, this may be performed no more than once per year.

Our fixed income allocation will include our emergency fund with the remainder in tax sheltered accounts split 50/50 between nominal bonds and inflation indexed bonds. We will use the G fund as much as possible.

Our equity allocation will include domestic, international, and emerging market stocks and large-cap, mid-cap, and small/micro-cap stocks. We will also allocate a percentage to REITs and other alternative asset classes if they promise diversification benefits and solid long-term returns. For the most part, these will be broad total market index funds, but they may be supplemented by small amounts of value index funds as needed to maintain a slight value tilt.

No asset class will represent more than 30% or less than 5% of our portfolio.

Asset Allocation:

Equity (75%)
Total Stock Market/C Fund 17.5%
Extended Market/S Fund 10%
Microcaps 5%
Large Value 5%
Small Value 5%
REITs 7.5%
Developed Markets/I Fund 20%
Emerging Markets 5%

Fixed (25%)
Nominal Bonds (12.5%)
G Fund 12.5%
SDP as needed
Inflation-indexed Bonds (12.5%)
TIPs Fund 12.5%


Any change to these percentages or change in funds used will require a 3 month waiting period. Development of any new asset class or new funds allowing us to invest in an asset class such as international small or international value stocks will require a 3 month waiting period prior to transferring funds.

Changes

Any significant changes to this IPS require a three month waiting period for reconsideration.


Signed

EmergDoc Emergdoc's Wife

[Ron]

Our IPS is simple:

I stay retired; wife remains working...

Since her income can support both of us (regardless of our investments), what more do we need :lol: ... It's really an "income" rather than "investment" policy statement.

(Not quite as complicated as Victoria...)

Truthfully, we do have an IPS document (no, I'm not about to share, here). I'll just say like all things, it depends on your financial/life situation and your desires for the future; there is no "standard answer" for every life situation - it would mean little to discuss ours, here.

- Ron

[VictoriaF]

Our IPS is simple:

I stay retired; wife remains working...

Since her income can support both of us (regardless of our investments), what more do we need :lol:

- Ron

Ron's IPS: Income Producing Spouse. :lol:

Victoria

[Ed 2]

Our IPS is simple:

I stay retired; wife remains working...



- Ron

This is my secret dream.

[BlueEars]

I too will opt out of sharing the actual IPS, but I really do have an IPS. However, I'll share an organizational tip.

I put my IPS in an Excel file that has a password (all financial stuff gets this treatment because I'm paranoid about security). With an Excel file you can have colored tabs for when you make changes to an IPS. It's amusing to see how many tabs I have since 2006. Also recently added a tab "change reasoning" so I can explicitly state why I've changed my mind yet again. This is called fine tuning (must rationalize process).

[norookie]

Our IPS is simple:

I stay retired; wife remains working...

Since her income can support both of us (regardless of our investments), what more do we need :lol:

- Ron

Ron's IPS: Income Producing Spouse. :lol:

Victoria

Sound like a plan I watched many females adopt Ron Good plan! After all they have the kiddo's! I went out with a female Dr (phd) and when I used to talk about work on the Docks her ears would perk up. Doc's, Doc's.....do you know some doctors? I think thats how she was raised being a Wellesley girl. I wonder if Drs and Attys still get all the girls ? EDoc, thats a great detailed IPS btw.

[Sunny Sarkar]

Thanks NAVigator for the kind words. Our IPS is designed after Taylor's 4-fund portfolio. It has been slightly revised since we bought our "Taylor-made" home 2 years ago, thus eliminating one short-term goal which required safely allocated liquid assets. As a result, our equity allocation went up. It now reads like this:

• Investment Philosophy:
  "Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
  
  Asset Allocation:
  Maintain overall 70% stock + 30% fixed-income allocation until age 50. Assets should be diversified across major asset classes including domestic equity, international equity (20-25% of equities), conventional bonds of short to intermediate term, and TIPS (50% of fixed-income).
  
  Funds & Accounts:
  Use low cost mutual funds, index funds preferably, which do not overlap and provide maximum diversification across asset classes. Try to assume only market risk as far as possible. Try to shelter tax-inefficient funds in tax-advantaged accounts to reduce tax drag.
  
  • Target Allocation:
    55% - Total Stock Market Fund
    15% - Total International Fund
    15% - Intermediate Bond Fund - IRA/401k only
    15% - TIPS Fund - IRA/401k only
    
    Money Market fund (6 months' expenses) - Taxable account
  Other considerations:
  Automate future contributions wherever possible. Rebalance yearly. No market timing. Exact sub-allocations are not as important as maintaining the overall 70/30 stock/fixed allocation - no need to make things complex in order to meet sub-allocation targets. Keep wills updated.

[neverknow]

..

[fcirullo]

Thanks NAVigator for the kind words. Our IPS is designed after Taylor's 4-fund portfolio. It has been slightly revised since we bought our "Taylor-made" home 2 years ago, thus eliminating one short-term goal requiring safely allocated liquid assets. It now reads like this:

• Investment Philosophy:
  "Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
  
  Asset Allocation:
  Maintain overall 70% stock + 30% fixed-income allocation until age 50. Assets should be diversified across major asset classes including domestic equity, international equity (20-25% of equities), conventional bonds of short to intermediate term, and TIPS (50% of fixed-income).
  
  Funds & Accounts:
  Use low cost mutual funds, index funds preferably, which do not overlap and provide maximum diversification across asset classes. Try to assume only market risk as far as possible. Try to shelter tax-inefficient funds in tax-advantaged accounts to reduce tax drag.
  
  • Target Allocation:
    6 months' expenses - Money Market fund - Taxable account
    Total Stock Market Index Fund 55% - IRA, 401k, Taxable account
    Total International Stock Market Index Fund 15% - IRA, 401k, Taxable account
    Intermediate-Term Bond Index Fund 15% - IRA, 401k
    TIPS Fund 15% - IRA, 401k
  Other considerations:
  Automate future contributions wherever possible. Rebalance yearly. No market timing. Exact sub-allocations are not as important as maintaining the overall 70/30 stock/fixed allocation - no need to make things complex in order to meet sub-allocation targets. Keep wills updated.

Perfect! The idea of an IPS is this: If you are incapacitated, a simple well written IPS such as this one is easy to understand and anyone in the family can use it to manage the family's money. No one will rip off your family's money after you teach them how to use a simple IPS that is written like Sunny's is.

Thank you for sharing it with us.

[The Wizard]

My "IPS" is simply a half sheet of paper (a file on my PC actually) with my target Asset Allocation on it which is a bit more complicated than just stocks/bonds since majority of my holdings are in TIAA-CREF family.
Additionally, I put a note on what I plan to do with new $$ going into my Roth IRA at VG.
There's just one of me, so I don't need one of those wordy IPS's that look like lecture notes...

[blackbird]

Mine is pretty consistent with Sunny's and the 4-fund approach.

Asset Allocation

Bonds (including cash): Age +/-2%
Stocks: 1 - % Bonds

Within Bonds: TIPS 20-40% (unless limited by size of tax-advantaged accounts)
Within Stocks: International 30-40%

Investment Selections

Vanguard Tax-Exempt Money Market (cash, maximum of 5% of total portfolio)
Vanguard Intermediate-Term Tax-Exempt Bond (bonds necessary in taxable account to maintain allocation)
Vanguard Intermediate-Term Bond Index or similar fund choice in 401(k) (tax-advantaged accounts only)
Vanguard Inflation-Protected Securities (tax-advantaged accounts only)
Vanguard Total Stock Market Index (taxable account)
Vanguard Total International Stock Index (taxable account)

I recently made the switch to Total International from FTSE All-World ex-US.

[V572625694]

1. Assets: 125% equities purchased on margin, the rest is gold.
2. Asset allocation:
- 40% - gold
- 30% - stocks
- 20% - funds
- 10% - other

The "other" is made up of fine art, oriental rugs, classic cars and rare wines, right? Because you can't lose on those!

[Paladin]

1. Assets: 125% equities purchased on margin, the rest is gold.
2. Asset allocation:
- 40% - gold
- 30% - stocks
- 20% - funds
- 10% - other

The "other" is made up of fine art, oriental rugs, classic cars and rare wines, right? Because you can't lose on those!

No actually "other" is made of of rare books!

[Beagler]

My IPS assumptions are baked in to my excel rebalance/asset allocation spreadsheet.

Like you, my IPS is held within my spreadsheet.

RE: your signature, with national unemployment around 10% (and underemployment also a problem) I don't think a "bad 401(k)" would keep many people from accepting a job offer these days.

[LadyGeek]

I added this thread to the wiki.

Please see Investment Policy Statement on the Bogleheads Wiki.

[LH]

Why should I have one?

I have not had one myself, I have filled out a couple sheets printed off the internet in the past. they are very very loosely defined, some deal a lot with advisor stuff, which if you do not have an advisor, is not the model to follow. The most basic ones, if you are on this board, are probably not very helpful per se to you. But for the average person, would be very helpful.

The main thing though, is it forces you to write down what you are actually doing, and makes you realize what assumptions you are making.

The one I am working on now, is a bit more indepth. I kinda looked at all IPS type things, and put almost all of it in there.


Kinda interesting to
1)think and write out what you are saving for, and when... Heck, I will be 60 in 2030, 70 in 2040.... I am (hopefully) gonna be 70 in 2040? wow.

2)Say you want to "retire early" ok, at what age and year, how much money do you have to save to get there, whats your portfolio now, whats your expected rate of return on the portfolio, what do you actually SPEND now, what do you think you will spend then. Ok, do you actually HAVE enough to "retire early", you actually have to do the Net Present Value calculations (on internet). Can you save more? Is retiring early really feasible? What about health care then? Well maybe a part time job.... Dang, if I have to keep working for 25 years, maybe I should not buy a new car, maybe cut back some, maybe work more, less vacations, less time with kids family, or work less, more time with kids/family now, work longer... Hmmmm.

3)College costs for kids. Well, how much do I need to spend 18-10 years from now? How much does college room and board cost now, public or private? THAT much? really? Well, will I pay all or part of it, and have kids take out loans?

4)if I die, what is the plan for the family? Hmmm, maybe I should actually figure this out NOW..... given that my portfolio is spread across 9 accounts, and 8 assets classes, each with both ETF and funds in them, resulting in a 9x16 grid that put its all together in real time. Ok non financial spouse, its all yours....... Uh. No... Not gonna work.
What exactly does my family get per month from SS? What target fund should I transfer the sheltered retirement assets to, to widow proof the suck. What payout fund should I transfer the life insurance too. How much cash flow does the family need, how much time until wife gets a job? What does the retirement portfolio "look" like, when taxable assets are left inplace to avoid taxes, and all sheltered are placed in a target fund?

5)what if I become disabled? What are the actual income flows....

So, maybe all that is beyond an IPS I guess. Maybe a
"Life Financial Policy Statement LFPS" or something.

A lot of that stuff, depends HUGELY on what you want... and well, what exactly do you want? Those are the big questions. A lot of self examination. Do you want to drive a new car, take great vacations, or be able to send your kids to private school and pay it yourself? Well, ALL of them of course!! What are your priorities? What is important to you? Is private school, really worth that much more than public??? Well, that stuff, is the real deal. You want to retire early? Well, what is early to you, when and how??? Ugh, I dunno, "earlier the better!" Uh, at 50! yeah 50! I want to retire then! I want to put my kids through private school, retire at 50, travel the world, drive a lexus. Yada yada yada. Then the actual writing of all the stuff out, the net present value stuff, the amount you have to save per year(ugh, I guess no lexus, or maybe no travel, or maybe no private school paid for by me, hmmm) puts realistic limits on you..... Retire at 50, ok, what about health insurance....

So anyway, IPS, are the closet thing I know to that, that would be somewhat widespread here on the board. I would think, even for a boglehead "gearhead" type of person, if you have not done an IPS, it would be good to actually do one of the more detailed ones. Just the self examination part, the goals with specific dates, ages, and NPV calculations behind them, are worthwhile. I will post mine at some point, for what its worth. Lots of details to take care of.

Have a nice day,

LH

[DaleMaley]

Why should I have one?

I have not had one myself, I have filled out a couple sheets printed off the internet in the past. they are very very loosely defined, some deal a lot with advisor stuff, which if you do not have an advisor, is not the model to follow. The most basic ones, if you are on this board, are probably not very helpful per se to you. But for the average person, would be very helpful.

The main thing though, is it forces you to write down what you are actually doing, and makes you realize what assumptions you are making.

The one I am working on now, is a bit more indepth. I kinda looked at all IPS type things, and put almost all of it in there.


Kinda interesting to
1)think and write out what you are saving for, and when... Heck, I will be 60 in 2030, 70 in 2040.... I am (hopefully) gonna be 70 in 2040? wow.

2)Say you want to "retire early" ok, at what age and year, how much money do you have to save to get there, whats your portfolio now, whats your expected rate of return on the portfolio, what do you actually SPEND now, what do you think you will spend then. Ok, do you actually HAVE enough to "retire early", you actually have to do the Net Present Value calculations (on internet). Can you save more? Is retiring early really feasible? What about health care then? Well maybe a part time job.... Dang, if I have to keep working for 25 years, maybe I should not buy a new car, maybe cut back some, maybe work more, less vacations, less time with kids family, or work less, more time with kids/family now, work longer... Hmmmm.

3)College costs for kids. Well, how much do I need to spend 18-10 years from now? How much does college room and board cost now, public or private? THAT much? really? Well, will I pay all or part of it, and have kids take out loans?

4)if I die, what is the plan for the family? Hmmm, maybe I should actually figure this out NOW..... given that my portfolio is spread across 9 accounts, and 8 assets classes, each with both ETF and funds in them, resulting in a 9x16 grid that put its all together in real time. Ok non financial spouse, its all yours....... Uh. No... Not gonna work.
What exactly does my family get per month from SS? What target fund should I transfer the sheltered retirement assets to, to widow proof the suck. What payout fund should I transfer the life insurance too. How much cash flow does the family need, how much time until wife gets a job? What does the retirement portfolio "look" like, when taxable assets are left inplace to avoid taxes, and all sheltered are placed in a target fund?

5)what if I become disabled? What are the actual income flows....

So, maybe all that is beyond an IPS I guess. Maybe a
"Life Financial Policy Statement LFPS" or something.

A lot of that stuff, depends HUGELY on what you want... and well, what exactly do you want? Those are the big questions. A lot of self examination. Do you want to drive a new car, take great vacations, or be able to send your kids to private school and pay it yourself? Well, ALL of them of course!! What are your priorities? What is important to you? Is private school, really worth that much more than public??? Well, that stuff, is the real deal. You want to retire early? Well, what is early to you, when and how??? Ugh, I dunno, "earlier the better!" Uh, at 50! yeah 50! I want to retire then! I want to put my kids through private school, retire at 50, travel the world, drive a lexus. Yada yada yada. Then the actual writing of all the stuff out, the net present value stuff, the amount you have to save per year(ugh, I guess no lexus, or maybe no travel, or maybe no private school paid for by me, hmmm) puts realistic limits on you..... Retire at 50, ok, what about health insurance....

So anyway, IPS, are the closet thing I know to that, that would be somewhat widespread here on the board. I would think, even for a boglehead "gearhead" type of person, if you have not done an IPS, it would be good to actually do one of the more detailed ones. Just the self examination part, the goals with specific dates, ages, and NPV calculations behind them, are worthwhile. I will post mine at some point, for what its worth. Lots of details to take care of.

Have a nice day,

LH

An Investment Policy Statement is usually only about how you manage your investments.......and that's it.

I would suggest that in addition to your estate planning documents, you have an IPS, a Financial Plan, and Instructions to your significant other if you die first.

Most of the items you are referring to are related to either your Financial Plan or Letter of Instructions.

My personal financial plan includes sections on:

-Change in net worth over previous calendar year
-Change in key market indexes over previous year
-Average portfolio return over previous year
-End-of-year Net Worth Statement
-Historical Net Worth Graph
-Check of actual AA versus target AA
-Estimated time to reach key financial milestones
-Status of achieving key personal goals
-Comparison to Millionaire Next Door Net Worth metric..Net Worth > Age times income divided by 10
-College funding
-Cash flow projection for next year
-General financial planning checklist and status
-Good financial moves made in previous year
-Financial moves to make in next year
-Reference materials

I update my IPS, Financial Plan, and Letter of Instruction at the end of each year. I then review them with key family members.

I try to work with an estate planning attorney and design my estate plan so it is as flexible as possible to minimize the expense of updating frequently to deal with estate tax law changes. Most experts recommend updating estate planning documents every 3 to 5 years.......or in the event of a significant change.

The key sections in my Letter of Instruction include:

-Explanation of estate planning documents
-Selection of attorney to settle estate
-Options for hiring financial planner
-Net Worth Statement
-Company benefits
-Beneficiaries of investments for trusts
-key web site and program passwords
-Life insurance policies

[LH]

Why should I have one?

........So, maybe all that is beyond an IPS I guess. Maybe a
"Life Financial Policy Statement LFPS" or something......

An Investment Policy Statement is usually only about how you manage your investments.......and that's it.

I would suggest that in addition to your estate planning documents, you have an IPS, a Financial Plan, and Instructions to your significant other if you die first.

Most of the items you are referring to are related to either your Financial Plan or Letter of Instructions.

My personal financial plan includes sections on:

-Change in net worth over previous calendar year
-Change in key market indexes over previous year
-Average portfolio return over previous year
-End-of-year Net Worth Statement
-Historical Net Worth Graph
-Check of actual AA versus target AA
-Estimated time to reach key financial milestones
-Status of achieving key personal goals
-Comparison to Millionaire Next Door Net Worth metric..Net Worth > Age times income divided by 10
-College funding
-Cash flow projection for next year
-General financial planning checklist and status
-Good financial moves made in previous year
-Financial moves to make in next year
-Reference materials

I update my IPS, Financial Plan, and Letter of Instruction at the end of each year. I then review them with key family members.

I try to work with an estate planning attorney and design my estate plan so it is as flexible as possible to minimize the expense of updating frequently to deal with estate tax law changes. Most experts recommend updating estate planning documents every 3 to 5 years.......or in the event of a significant change.

The key sections in my Letter of Instruction include:

-Explanation of estate planning documents
-Selection of attorney to settle estate
-Options for hiring financial planner
-Net Worth Statement
-Company benefits
-Beneficiaries of investments for trusts
-key web site and program passwords
-Life insurance policies

Ah, thats good stuff. I thought there must be some names and such for all that I was doing. The attorney to settle estate is a good idea.

I have a spreadsheet, that has all that financial plan in it. Maybe I should write it out.

I think I will make one big document, and see how I like it. Its probably best to end up splitting them all out in the end. But for now, having it all on one sheet, together has some appeal to me.

[NAVigator]

I was amazed to see how many people include much more in the IPS than necessary for giving guidelines for investments. I like the set of documents that DaleMaley outlined.

I would add one more thing to the Letter of Instruction; a "Records" section. This would identify where every account is located and the account number. It would also give the location of all legal documents, such as title to the car and deed to the house, etc. Insurance information should also be given for life, home, auto, etc. I was surprised how much information I put in my "Records" section.

Jerry

[Cody]

Thanks Peter!

I too am older than my wife by 3 1/2 years. Putting fix assets in my IRA makes some sense at 70 1/2 (due to require distribution then).

NAVigator: where did DaleMale outline this docs.

Minnesota buddy,
Cody

[Ron]

I was amazed to see how many people include much more in the IPS than necessary for giving guidelines for investments.

It all depends on your personal situation. In our case, our IPS also covers our investment desires for our (disabled) son's assets, which has been documented by the parties that will handle our/his remainder estate after we pass.

BTW, this has already been documented with "his" financial firm (taking over trust/investment management after we're gone, in partnership with other parties). Our elder law attorney (working in conjunction with the financial person) has in addition to our wills/trust, all documents related to our investments, and is stated as such in our IPS. That allows anybody to know about our assets, but not allow access to them.

Sometimes it's good to document "what's in your head". The exercise is not always for your current investment style as a reminder, but to also cover additional phases in your life (yes, we also document in our IPS how investments will be handled not only our passing, but also in the event of serious illness, where income security is even more important).

An IPS can be as simple or granular as you wish, to fit the need. Some thought should be given to not only today, but the "what if's" in life. It's easier to put something in writing while you are physically/mentally able to do so, easily.

- Ron

[DaleMaley]

Thanks Peter!

I too am older than my wife by 3 1/2 years. Putting fix assets in my IRA makes some sense at 70 1/2 (due to require distribution then).

NAVigator: where did DaleMale outline this docs.

Minnesota buddy,
Cody

See my earlier posting above......

-estate planning documents
-ISP
-Financial Plan
-Letter of Instruction to surviving spouse

[Sunny Sarkar]

I have since settled on a "Health Policy Statement":

• 1. If it tastes good, spit it out.
  2. Run [for your life].

I think it's just as simple, and just as hard to stick to, as my IPS.

[paper200]

1) Save a lot when working
2) Pay down mortgage (done)
3) Keep expense down
4) Educate children
5) Don't lose capital
6) Be nice to wife

[Paladin]

Thanks Peter!

I too am older than my wife by 3 1/2 years. Putting fix assets in my IRA makes some sense at 70 1/2 (due to require distribution then).

NAVigator: where did DaleMale outline this docs.

Minnesota buddy,
Cody

See my earlier posting above......

-estate planning documents
-ISP
-Financial Plan
-Letter of Instruction to surviving spouse

The Letter of Instruction might be for someone other than a spouse e.g. a son or other relative.

[Peter Foley]

LH wrote:

The one I am working on now, is a bit more indepth. I kinda looked at all IPS type things, and put almost all of it in there.

Kinda interesting to
1)think and write out what you are saving for

DaleMaley wrote:

An Investment Policy Statement is usually only about how you manage your investments.......and that's it.

I would suggest that in addition to your estate planning documents, you have an IPS, a Financial Plan, and Instructions to your significant other if you die first.

You can tell from my post that I think the IPS can, and should be, more inclusive. Especially for younger investors it is important to keep you eye on your goal as well as managing your investments. Present decisions regarding spending and saving have future implications. Why would you not include at least that "how are your going to get there" part of your financial plan in your ISP?

It does not take much additional effort to include life plan statements to round out your ISP. At a minimum, the details of how you are going to achieve your financial goal should be detailed. As LH and Dale suggest above, this can also be done in a separate plan.

[beardsworth]

IPS
1. Assets: 125% equities purchased on margin, the rest is gold.
2. Asset allocation:
- 40% - gold
- 30% - stocks
- 20% - funds
- 10% - other
3. Gold:
- Accelerate purchases as the market momentum propels it to new heights.
- Remember to sell it right before it declines.
4. Stocks:
- Mine Internet boards for hot tips.
- Trust your market timing savvy.
5. Funds:
- Buy the last year's best performing stock fund.
- Replace with the new best performing fund annually.
6. Other:
- Play money.

Victoria, suggest you re–use this as the original post in a new and separate 72–page, million–views thread exploring in exquisite detail the rationale and workings of the Impermanent Portfolio.

Marc

[iggyc01]

Here's another view and some examples from CFA Institute.

https://www.cfainstitute.org/-/media/do ... 006BE3D96

Also for anyone taking the tests: RRLLTTU
Return Objective
Risk, Willingness and Ability

Constraints:
Legal, Liquidity, Tax, Time Horizon, Unique Circumstances
https://gostudy.io/blog/understanding-ips-cfa-level1

[HawkeyePierce]

Mine is more of a "personal finance statement", covering investment, budgeting and other aspects of my finances.

Here goes (28M, single, no kids):

Code: Select all

- Investment Policy Statement
	February 21, 2019
	- Financial Account Information
		- Current Financial Situation
			- Income
				- $employer: $xxx
			- Assets
				- Retirement Accounts: $xxx
				- Brokerage Account: $xxx
				- Cash: $xxx
			- Debt: $0
		- Tax Advantages
			- Tax Deferred: $xxx
			- Tax Free: $xxx
		- Annual Contributions
			- Pre-tax 401k: $19,000
			- Backdoor Roth IRA: $6,000
			- Mega-backdoor Roth IRA: $15,000
			- HSA: $3,500
			- Taxable: $xx,000
			- ESPP: $xx,000
			- Cash: $xx,000
	- Principles
		- The Five Hurdles (with apologies to William Bernstein)
			- Spend Drastically Less Than I Earn
			- Gain and Maintain an Adequate Understanding of Finance
			- Understand Financial History
			- Maintain Strict Long-Term Discipline
			- Fervently Avoid Sharks
		- Stay Conservative, Avoid Undue Risks
	- Personal Finance Philosophy
		- Budgeting
			- Save at least 60% of my after-tax earnings
			- Give Every Dollar a Job
			- Embrace Your True Expenses
			- Roll with the Punches
		- Taxes
			- Minimize taxes while always staying strictly within the confines of the law
		- Insurance
			- Insurance is for liabilities, not return
			- Only insure against events I could not reasonably afford
			- Insure my earning potential with disability insurance
			- Purchase a term life policy once I have dependents or before the age of 33, whichever is first.  Insure 5x my total compensation.
			- Purchase umbrella insurance once my net worth reaches $1,000,000
                        - Purchase long-term private disability insurance to pay out $72,000/year before the age of 30
		- Debt
			- Avoid debt
			- When taken on, pay down debts with interest rates above expected returns in the market as aggressively as possible
		- Investments
			- Keep costs as low as possible
			- If I were to ever engage a financial advisor, only hire an advice-only fiduciary
	- Investment Objectives
		- Liquidity Needs
			- Maintain twelve months’ living expenses in cash
		- Short Term Goals
			- Purchase a new notebook ($xxx)
			- Fund a sabbatical in New Zealand ($xxx)
			- Yearly vacations ($xxx/year)
			- Begin saving for a down payment ($xxx)
			- Be prepared to replace my car ($xxx)
		- Long Term Goals
			- Purchase a home ($xxx)
		- Financial Independence
			- Reach financial independence by age 45 ($xxx)
	- Asset Classes
		- Asset Classes I Must Include
			- US Equity Market
			- International Equity Market (Developed & Emerging)
			- Treasuries
		- Asset Classes I May Include
			- Real Estate
			- TIPS
		- Asset Classes I Will Avoid
			- International bonds
			- Hedge funds
			- Commodities
			- Actively-managed funds
			- High-yield and corporate bonds
			- Investments with management fees exceeding 0.15% or any load, sales or 12b1 fees
	- Asset Allocation
		- Target Allocation Between Equities and Fixed Income
			- 80% Equities, 20% Fixed Income
		- International Investments
			- No more than 20% of my equity portfolio will be invested in international equities
		- Time Frame for Reconsideration
		- Deviation Thresholds for Rebalancing
			- Rebalance when my asset allocation deviates by more than 10% up or down
	- Monitoring and Control
		- Frequency of Monitoring
			- Daily, I will monitor my budget
			- Weekly, I will reconcile my checking account
			- Monthly, I will review the previous month’s spending
			- Each quarter, I will review my asset allocation in comparison to my target allocation
			- Each January, I will perform a thorough review of my finances
				- Review insurance and compare quotes from other providers
				- Investigate relevant changes to tax law
				

[Ferdinand2014]

Investment Policy Statement
1.) No new debt
2.) Maximum before-tax, 25% after tax contribution
3.) S&P 500 index fund for equity portion
4.) U.S. short term treasuries of 10%
5.) 4% inflation adjusted, 2 step static allocation rebalance approach in drawdown

“Stay the course” - J. Bogle

“Our favorite holding period is forever” - W.Buffett

Investment Accounts

FXAIX (Fidelity 500 Index Fund)
NINDX (Columbia Large Cap. Index Fund)
FDLXX (Fidelity Treasury Only Money Fund)
FUMBX (Fidelity Short Term Treasury Fund)
529 ( Fidelity - New Hampshire)

[RadAudit]

I was wondering if some people could post thier IPS statements here, if they have them in a handy format,

OK. FWIW (Just noticed OP posted the original request in 2010. Hope he wasn't waiting for the latest inputs.]

Target Allocation:
VTSAX – Total (Domestic) Stock Market ~ 60% of the category
VGTSX – Total International Stock Market ~ 40% of the category
Total Stocks – 49%

VIPSX – TIPS ~ 14% of the category
VBTLX – ~ 56% of the category. Total Bond Fund
VTABX – ~30% of the category. International Intermediate Term Bond Fund
Total Bonds – 49%

VMMXX – Money Market Fund -2%

[LadyGeek]

This 2010 thread is referenced in the wiki: Investment policy statement ("External links")

It would be interesting to see if anyone who has created an Investment Policy Statement has followed their statement over time.

(The wiki page was created in 2009.)