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IPS - Investment policy statement - Do you have one?

Started by rtysmith, September 11, 2018, 09:04:02 AM

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Interested in seeing others IPS's, mine is below:

RTYSMITH IPS 6/10/2018 (last update)

1. Launch Child 1 and Child 2
2. Maintain and enjoy marriage
3. Maximize health
4. Secure financial standing

Investment Objectives:
These are the main objectives of our investment program. We have developed them to have discipline, structure and comfort after regular review of our financial resources, financial goals, asset allocation, risk tolerance and time horizon.
* Objective 1: To Re"lax" when we are ready financially, mentally, physically and emotionally. Never "Have To" work again. Live debt free. (FIRE - financial independence, retire early; or FAT FIRE (lots o $) or BARISTA FIRE (retire but work small jobs)
* Objective 2: To have passive annual income from our investments of $.5 million+ in today's dollars.
* Objective 3: (a.) To never be a financial burden upon our descendants and (b. if possible) leave a meaningful monetary gift with a primary focus on the next generation's education.
* Objective 4: To generate returns, manage risk, minimize fees & taxes
* Objective 5: To monitor portfolio allocation, to benchmark returns against expectations, and to consider revisions to portfolio
* Objective 6: To find emotional and moral comfort in our wealth, investments and portfolio volatility 

Risk Tolerance:
Our ability to tolerate the uncertainties, complexities and volatility inherent in the investment markets has been considered in the development of this investment program. The main factors that have influenced our risk tolerance and asset allocation are: age, present financial condition, specific financial goals, discretionary income and past investment/life experience. Ensure we have liquidity and not too much concentration in one investment/counter-party with broad diversification. Minimize cash drag while maintaining cash cushion comfort (which is smaller than we think)

Investment Philosophy:
"Buy-and-hold, long-term, implemented at rock-bottom cost"
"Performance comes. Performance goes. Fees never falter." —  WB
"To us, success financially means we can tie current assets to future liabilities in such a way that we can do all the things we want to do. It's not a dollar figure"

Asset Allocation:
Maintain overall 45% stock, 10% cash and 45%  fixed-income. Fixed income allocation primarily includes Municipal Bonds and alternative FI (On-line lending; Consumer, Real Estate, Litigation/Invoice Finance). Assets should be diversified across major asset classes including domestic & international equity.

Funds & Accounts:
Use low-cost ETF's (No individual stocks) which do not overlap and provide maximum diversification across asset classes. Assume only market risk as far as possible. Shelter tax-inefficient investments in tax-advantaged accounts to reduce tax drag. Fully utilize IRA and 401k. 

Mutual Funds, Gold, Commodities, Currencies, Hedge Funds, Fund of funds, Business Development Companies, Options, Government Bonds (Other then Municipal), ICO's, cryptocurrencies, Restaurants, Movie Deals. Business with* or loans to friends or family**. No investments with current clients. All equity investments are preferred and "top of the stack", no common stock equity investments.
*Goal not reality, but sure to lose $ and friendship/family
**No one starves

Other considerations:
Rebalance and Tax Harvest Losses semi-annually. No market timing. Exact sub-allocations are not as important as maintaining the overall 45/10/45 allocation - no need to make things complex. Focus on Tax Efficiency, Passive Income, Which Entity and Time/Liquidity. Maintain Multiple custodians. Trust gut.

Thinks to remember:
-Our kids are to know generally of our financial situation but not feel entitled or burdened.
-You can't put a price tag on peace of mind
-Success is not about money, it's about being healthy and controlling how we spend our time-there are only 168 hours in a week.
-We strive to find the balance between self, family, friends, work, community, sleep, exercise.
-Wealthy or Rich is not just a number.
-Labels are for soup.
-Shoe makers should stick to making shoes.
-Keep the front wheels up.
-Limit unforced errors.
-Don't spend any time on envy-be grateful. 
-Be fearful when others are greedy and greedy only when others are fearful.
-There is no amount of money that can't be lost (or spent trying to save the un-savable (including our children, siblings or parents))
-I don't know where we're all going, but I ought to know where I stand

-Dear Future Me: Next time the sh*t hits the fan, don't do anything stupid. Sincerely, Me
-There is no interest like self-interest, (NILSI)
-You make exactly, to the penny, what you feel you are worth
-When anything: MOMF (Move on Mother Fccker)
-Net Worth >2.5M = ultra elite wealth
-living a good life does not mean a perfect life
-Take the higher road
-3 sides to every story
-let go and let's go
-perfection is an illusion
-Kate Spade, Anthony Bordane (worth 1.2M at time of death), Amy Winehouse, Prince, Michael Jackson...
-comparison is the villain of joy
-happily ever after is a fairy tale
-Net worth = Network
-if you try very hard and you're lucky you'll be "old", married and empty nested for about 1/2 your life (in comparison to being young and/or parenting with children under 21)
-BEN: be extra nice
-sh*t rolls down hill
-Don't leverage but secure access to low-cost credit options when you DON'T NEED THEM (HELOC, CC's)
-achieve/maintain unf***ability
-now that you're out of debt, stay out of debt
-It all comes down to one elementary mathematical principle: compound interest.
-People are a holes


Wow! Awesome! I think I'm going to have to create a post about this topic and use you as an example! Great idea!

I guess mine has been pretty simple since leaving work in 2012:

1)  Have my money work for me so I don't have to
2)  Don't lose money
3)  Everything is for family and those I care about



Thanks - its an ongoing work in progress - sometimes it gets longer, sometimes shorter.

It is totally not correctly cited its usually just internal.

Jon Sharpe

Well done! I actually just wrote up my own for an upcoming post. See below...

Achieve "paid-work-optional" status no later than age 55 with investments that generate $100k in annual income (2018 dollars) and grow with the rate of inflation
Target no greater than a 4% withdrawal rate and at least 25x annual expenses
Primary home mortgage paid off no later than age 55
Save one-half of the cost to attend an in-state college for both children in tax-advantaged 529 plans by 2018 and 2020

Investing Philosophy
Invest at least 20% of gross income annually
Maintain a high-risk tolerance
Take an evidence-based approach to building wealth
Favor total-market index funds to spread risk and keep fees low
Dollar-cost-average with monthly investments during bull and bear markets
Maximize tax-advantaged investments every year (401k, HSA, 529)

Pre-Retirement Asset Allocation
60% domestic equities (VTSAX or equivalent)
20% international equities (VTIAX or equivalent)
10% REIT (VGSLX or equivalent)
10% Bonds/Cash (VBTLX or equivalent or cash)

Emergency Fund
Keep at least six months of expenses in an easily accessible cash, cash-equivalent, or HELOC account to be used in emergencies

Areas to Investigate Further
Post-retirement asset allocation and drawdown plan

Other Considerations
Keep it simple and avoid unnecessary complexity
Automate as much as possible
Rebalance once a year and only if more than 5% off allocation strategy
Utilize the minimum number of asset classes to achieve goals
Revisit the plan once a year
Do not voluntarily leave my current employer before the age of 55 in order to receive lifetime retiree medical benefits