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IPS?
Old 10-16-2020, 05:16 PM   #1
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IPS?

I was reading a financial wellness / retirement planning book last winter (I forget exactly which one as I got a bunch of them at the same time from the library) and one thing that struck a chord with me was the idea of creating a personal Investment Policy Statement. (IPS) I had never heard of this before last year so I made it a goal to develop one by the first of this year.
So I did, and I've been following it for the past 10-1/2 months and it seems to be helping.
Anyone else here have their own IPS?
Has it been helpful?
Was it set up by an adviser or did you do it yourself?
-Just curious.
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Old 10-16-2020, 05:36 PM   #2
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Quote:
Originally Posted by ArmchairMillionaire23 View Post
I was reading a financial wellness / retirement planning book last winter (I forget exactly which one as I got a bunch of them at the same time from the library) and one thing that struck a chord with me was the idea of creating a personal Investment Policy Statement. (IPS) I had never heard of this before last year so I made it a goal to develop one by the first of this year.
So I did, and I've been following it for the past 10-1/2 months and it seems to be helping.
Anyone else here have their own IPS?
Has it been helpful?
Was it set up by an adviser or did you do it yourself?
-Just curious.
I created mine about 5 years ago when I first heard about an IPS while reading on the Bogleheads forum. I wrote it myself (itís in a tab in a financial tracking spreadsheet that I have been maintaining for about 7 years). I did review some examples that I found on Bogleheads and borrowed some concepts/content from them and then modified as desired.

I used it to plan my financial approach up to my 2018 retirement, and still largely follow it. I do not update mine any more, but I havenít really deviated from it much either.

I think itís a great exercise to go thru for those needing some structure in there investment strategy.
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Old 10-16-2020, 05:44 PM   #3
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I wrote one about 7 years ago when I found bogleheads.org. I refer to it whenever I get the urge to do something stupid. I'm probably going to retire next year, so I need to draft an RPS (Retirement Planning Statement).

Objective: $XXM in retirement savings with a paid off house.

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

Live within retirement budget and save the rest.

Do backdoor Roth for myself and wife annually. 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.

Invest maximum allowed in 401k 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 6% into company SSP II plan to get the 6% match.

Invest a minimum of $75k annually in taxable account.

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

Military Pension: Invest 100% of pension in taxable account.

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.

Inheritance: let my wife decide what to do after waiting three months.
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Old 10-16-2020, 05:54 PM   #4
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Iíve maintained one for about 6 yrs. I started a year or so before retirement. I think I thought of it on my own but seeing others here and on Bogleheads convinced me to actually execute the document. It has broad objectives, list of accounts, AA targets and rebalance triggers. I include a distribution spreadsheet for each year to track distributions and transfers.
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Old 10-16-2020, 08:06 PM   #5
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I found it to be useful for self discipline on decisions. I think it can be especially useful for a young investor to resist the urge to pick some stocks (or to at least develop some objective criteria to pick stocks if they can't resist the urge). More recently, I wrote one about the decision not to do Roth conversions. I end up loosing mine, but the act of writing it out concisely tends to prevent later reversals.
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Old 10-16-2020, 10:05 PM   #6
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Originally Posted by ArmchairMillionaire23 View Post
I was reading a financial wellness / retirement planning book last winter (I forget exactly which one as I got a bunch of them at the same time from the library) and one thing that struck a chord with me was the idea of creating a personal Investment Policy Statement. (IPS) I had never heard of this before last year so I made it a goal to develop one by the first of this year.
So I did, and I've been following it for the past 10-1/2 months and it seems to be helping.
Anyone else here have their own IPS?
Has it been helpful?
Was it set up by an adviser or did you do it yourself?
-Just curious.
I have been a Boglehead since before there was a dedicated Bogleheads website (i.e., since Morningstar days). So, yes, I have had an IPS for more than 15 years.
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Old 10-18-2020, 01:50 AM   #7
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Sorry, I never heard of it. I'm sure it would have saved me a lot of grief as I made just about every mistake possible. My unwritten IPS was 1) spend (a lot) less than you make. 2) Save, save, save. 3) Invest as conservatively as you can and still increase your stash.

Too late to go back now, so I'll stick with my unwritten IPS. YMMV
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Old 10-18-2020, 03:06 AM   #8
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yes. I've had one for over a decade -- though I didn't know what it was called when I first did it!

I update it every 3 years or so. Really when the mood strikes me that my world has changed enough for a structured revisit of major goals due to age, kids, career, etc.

I find it invaluable for getting the complexity out of my head, down on paper, and organized. I also share it with my better half so that we're on the same page.

I highly recommend it to everyone.
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Old 10-18-2020, 05:15 AM   #9
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Same here. Consider it a "contract to yourself". For me, though, it's also a full explanation of what we do and why in case I pre-decease my wife.

Bogleheads wiki on the subject: https://www.bogleheads.org/wiki/Inve...licy_statement

Cheers
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Old 10-18-2020, 05:40 AM   #10
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Bogleheads wiki on the subject: https://www.bogleheads.org/wiki/Inve...licy_statement

Cheers
Big-Papa
Great link! Thanks. I own the book "The Bogleheads' Guide To Retirement Planning" and I visit that site from time to time but hadn't seen that yet.
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Old 10-18-2020, 06:27 AM   #11
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Great link! Thanks. I own the book "The Bogleheads' Guide To Retirement Planning" and I visit that site from time to time but hadn't seen that yet.
No problem. There's a wealth of info on their wiki pages! Unfortunately, newbies will often come directly to the forum and ask questions that could have easily been answered if they had just started with the Wiki. Oh well...
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Old 10-18-2020, 07:08 AM   #12
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I wrote an IPS more than 5 years ago after reading about it (probably at Bogleheads?) - and never looked at it again. However, I’ve always reviewed my portfolio/net worth quarterly with lots of metrics showing me where I’m at versus my “plan” - my plan changes glacially. The spreadsheet automatically evaluates AA, returns, net worth, annuitization hurdle, individual fund correlation matrix, and many other metrics. And I’m not at all impulsive so I’ve never had a problem staying on track. YMMV. I can see where an IPS could be a good idea.
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Old 10-18-2020, 09:31 AM   #13
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... never looked at it again. ...
I confess to not having one personally as DW and I are very well synchronized on strategy, but I have been involved in writing several IPSs for nonprofits and have seen that by far the value of the IPS is in writing it. The investment committees work and reach agreement on major strategies, prohibited investments, benchmarks, etc. usually with participation from their FA. This really puts everyone on the same page.

In the nonprofit context, too, the IPS is a tool for evaluating the FA's portfolio design and execution. I was in one situation where gold was specifically on the prohibited assets list and the FA had bought some gold. Adios, FA!

Another good thing for any IPS, IMO, is to prohibit assets that cannot readily be valued by independent means and to prohibit assets that cannot be easily moved from one custodian to another. These two prohibitions fence off many, many, possible FA sins.
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Old 10-18-2020, 10:31 AM   #14
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I don't have a personal IPS written down.
I certainly see the need for one when a bunch of people like a non-profit, investment club, etc are deciding investments as it would give a framework or rules.

I also don't have a Mission Statement.

Just lazy I guess. I think I'll borrow corn18 's Statement to use as a starting point.
My main concern's are what if I develop alzheimers or die (DW lacks investment interest).
It would be a good set of rules to follow at that point.
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Old 10-18-2020, 11:06 AM   #15
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Found this in my finance folder the other day:

1. Being contrarian doesn't just mean doing the opposite. The "contrarian" street-crosser gets run over by a truck.

2. Don't waste time mastering things that simply don't work (see lessons 10 through 12).

3. Technical Analysis: The only chart pattern worth noting is the jagged, but likely downward-sloping line of your savings if you follow this technique.
Don't completely agree with this one: To me, technical analysis is like alcohol, when used in moderation, it can actually be beneficial.

4. Albert Einstein allegedly declared compound interest "the most powerful force in the universe." High-interest credit card debt aims that force at your wallet. To get compound interest pointed in the right direction, save (and invest) early & often!

5. Those who know what they're doing make complexity seem simple. Folks who don't (or are trying to sell you something) make simplicity complex.

6. None of the time spent checking & rechecking Yahoo! Finance portfolios counts toward those

7. One of my favorite lessons from the poker table: Action is overrated. The best players (investors) are constantly weighing the opportunities, but rarely are they moved to act.

8. Vanguard founder Jack Bogle: "Time is your friend; impulse is your enemy."

9. Selling is overrated. Reason No. 1: We often sell potential multi-bagger winners that would more than make up for our losers.

10. In the hands of a good storyteller, almost every stock looks like a winner.

11. Most of us are too enamored with "so you're saying there's a chance" opportunities. A Hail Mary belongs on the gridiron or in the pew -- not in the brokerage account.

12. A great rule of thumb for buying a house. If a home is selling for 150 times the monthly rent (or less), it's generally a good deal. If it's selling for more than 200 times the monthly rent of a comparable property, you're better off renting."

14. Sir John Templeton's quote: "'This time it's different' are the four most expensive words in the investing language." The details change, but the basic storylines remain the same.

15. Options promise big gains in short time periods. The problem? About 3 out of every 4 expire worthless. Contrast that with a stock, which doesn't expire.
Definitely disagree with this one. 3 out of 4 do expire worthless, that's why you 'sell' out of the money covered calls on stable blue chips.

16. Keep a journal (or spreadsheet) of your stock picks, complete with your rationale for each move. Then look back on it to see if you were right. We may think we're good dressers, but all it takes is a high-school yearbook to prove otherwise.

17. Falling knives can be death -- especially when they're rusty. What this means is, that just because a stock is down substantially, doesn't mean it's a bargain.

I found this out 1st hand back in 2000-2001.
Iíd see a stock that was $200 a share the year before, now trading at $50.
I thought to myself, wow what a bargain, so Iíd buy 100 shares, & a month later it was $25. I tried to catch a falling knife, & got cut badly, but I learned a valuable lesson.


18. If you can learn quickly from your own mistakes, you're ahead of the game. If you can learn quickly from others' mistakes, you've won the game.

19. Be fearful when others are greedy, & greedy when others are fearful.


I'll add one more that I think is very important.
I subscribed to investors business daily one year back in the 90s.
They lean heavily on technical analysis, which I take with a grain of salt,
but they did make one very important point, at least for anyone who actively trades.

Set a stop loss of approximately 8.00% on every stock you buy.
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Old 10-18-2020, 11:14 AM   #16
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I think an IPS is a lot more useful to someone starting out or early in their accumulation phase. Those who are now either retired or close to RE already got this figured out one way or another.

I am now working on refining my RPS (retirement policy statement)!
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Old 10-18-2020, 11:22 AM   #17
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My IPS (RPS) is 10+ years old. I have made many alterations to it because it is MY plan and I can change it any time that feel like it. I admit that I have not made any substantial changes in over 5 years as I am quite satisfied "as is". It is a wonderful guide to me, especially in turbulent financial times. I have reviewed it with DW and we have both signed the latest copy as a commitment to use it as a guide to the future.

I believe in simplicity and this document simplifies our life.
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Old 10-18-2020, 11:56 AM   #18
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I think an IPS is a lot more useful to someone starting out ...
Yes, like possibly a surviving spouse who has not been involved in the investments or possibly an advisor that the spouse brings on board or possibly the corporate trustee of a testamentary trust.
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Old 10-18-2020, 12:18 PM   #19
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I think an IPS is a lot more useful to someone starting out or early in their accumulation phase. Those who are now either retired or close to RE already got this figured out one way or another.

I am now working on refining my RPS (retirement policy statement)!
A+
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Old 10-22-2020, 04:15 AM   #20
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Like many others, yes, I created my own many years ago based on the bogleheads wiki.
I have a primary objective with strategies to accomplish it.
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