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Published by:
@PhilLHendricks
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Originally featured in:
philiphendricks.com
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Investment Policy Statement
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Source: A Wealth of Common Sense
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“Having a plan is important because it’s impossible to make rational decisions about investments without one.”
– Larry Swedroe
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Last updated January 2, 2020
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The purpose of my investment plan is…
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• nest egg for retirement
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• money for traveling
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• college education for kids
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• safety net for emergency needs
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These are my expectations and goals…
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• the portfolio will fund my post-retirement living needs for 40 years
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• being able to pay the bills and other living expenses without worrying about money
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• I'd like to retire by age 55
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This is my time horizon…
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• 29 years until retirement, then 40 years post-retirement
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• assuming I have my first child at 30, 22 years until college
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This is my target asset allocation…
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• 75% stocks, 20% bonds, 5% crypto
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• 25% US large cap, 20% US mid-small cap, 10% Int'l developed market, 10% emerging market, 10% REIT
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• 10% TIPS fund, 10% US bond index fund, 5% bitcoin
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• Minimum $15k in savings account as emergency fund
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This is how diversified I'd like to be…
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• For my FUN portfolio, I'm willing to put all my eggs in a few baskets, and watch those baskets very closely
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• For my RETIREMENT portfolio, I will NOT invest in individual stocks
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My stated risk tolerance is based on…
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• I want to maximize gains at this age
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• I want to have enough liquidity to take advantage of market opportunities
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• My age and time horizon
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I will be rebalancing…
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• Once a year on June 1
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• When my asset classes move more than 3% from target
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I will review my investment performance…
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• Every quarter
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These are my savings targets…
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• 33% of my monthly take home pay
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• Max out my Roth IRA every year
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• 90% of every bonus
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I am to increase the amount I save…
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• in proportion to my increase in take home pay
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I feel comfortable investing in…
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• Individual stocks
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• Index funds
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• Low cost funds
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• Low turnover funds
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• Cryptocurrencies
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I will never invest in…
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• Any company whose business I can't easily understand
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• Any company that makes a product I don't personally use, or worse, I use their competitor's
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• Products with fees over 1%
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• Long term investments with capital I need in the short term (<5 years) for spending needs
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The % of my portfolio I am comfortable investing in individual stocks…
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• Only an amount I'm comfortable losing entirely
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I will select investments based on…
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• high cost vs low cost
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• high turnover vs low turnover
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• a set dollar cost averaging schedule
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• asset allocation
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• a company's earnings and their story to grow it
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• whether it's undervalued and part of an emerging industry trend
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I will judge the success of my investment plan on…
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• the amount I save and invest annually
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• staying on track to reach my stated long term goals
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I will only sell investments…
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• when I rebalance
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• when they become overvalued
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My investment philosophy summed up in one line…
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• I'm slowly building wealth through buy and hold while looking for undervalued assets
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I will review and update my common sense IPS…
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• annually
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