Author Topic: Post Your Investment Policy  (Read 2757 times)

NorCal

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Post Your Investment Policy
« on: September 12, 2018, 10:06:17 PM »
I know most people's investment policy is largely private, but it also seems to be something beginners struggle with.  We just updated our investment policy, and I thought this might be useful to some of you out there.  An anonymized version is below. 

For context, I am 37 and currently have net worth around $1.5M.

What is your investment policy?

Savings and Investment Policy
September 2, 2018
Goal:

Our goal is to achieve financial independence around 2025.  FI is defined as no longer needing to work to support our needs, but with the option to continue working to further support our wants.

Requirements:

We expect to need investment accounts with a value of ~$2.0M, plus a paid off house.  We also plan to have $60K in college funds for each child.

Savings Plan:

We will maintain a minimum of a 50% savings rate, defined as take home pay + 401k contributions-total spending.  We can adjust our lifestyle upwards or downwards (with a preference towards downwards) to maintain this savings rate.  Exceptions will be made for short-term career transitions and moving expenses, not to exceed 3 months.
We will continue to max out 401k allocations with pre-tax dollars.  College funds will be seeded with an initial $5K, and contributed to at a rate of $250/child/mo.  Any additional future option to increase savings in pre-tax or ROTH accounts may be taken without revising this policy, but options that reduce them require revisions to this policy.
Additional post tax savings will be invested ~50% in taxable brokerage accounts and ~50% will be used to pay down the mortgage.

Savings Allocations

All individual accounts will have a target allocation of 65/35 equity/fixed income in the case of portfolios with only stock/FI options.  Portfolios that have real estate or other alternatives will have a 65/25/10 split, with 10 going to alternatives.

The equity component of the portfolio will be split 70% to US stocks and 30% to International stocks.  The US component will be diversified between small/mid/large cap stocks based on the simplest method to achieve this diversification.  The foreign component will be diversified between developed and emerging markets based on the simplest method to achieve this diversification.
The bond component of the portfolio will use consolidated bond funds for any portfolio with less than $75K in bond allocation.  Portfolios with more than $75K in bond allocation may have independent bond components to reflect the broader bond market, but this break-out will be defined before investing money.

College Funds will be invested in age-appropriate options, and will become more conservative over time.

As exceptions, accounts with less than $20K may be invested in single index funds, or single bond funds for simplicity.  They will be moved to the target allocation if the balance ever exceeds $20K.

The ROTH IRA will be invested with the Schwab Intelligent Portfolio, which will vary somewhat from the allocations above.

Alternative investments such as the exercise of company stock options or [Investment in family members Real Estate Development Company] may be made on an ad-hoc basis, as long as the total value of these investments doesn’t exceed 7.5% of our total investment portfolio. 

Direct real estate investments may be made outside of this policy if there is good opportunity to do so.

Rebalancing:

All accounts will be re-balanced as this policy goes into effect.  Afterwards, they will be rebalanced on the following schedule
•   [Wife’s] 401k:  Will be rebalanced annually after maximizing contributions
•   Schwab IRA:  Will be rebalanced through reinvested dividends, or annually in December or January.
•   [Husband’s] ROTH IRA:  Will be rebalanced automatically by Schwab
•   529 Plans: Will automatically become more conservative as the kids age
•   Taxable Brokerage:  Will be re-balanced through additional contributions, or in June of each year if needed.

Plan Review:

This plan will be reviewed annually in December or January, or as investment priorities change (job change, move, etc).  Logistical changes, such as consolidating retirement accounts, can be made without official changes to this document.  Changes to target allocations (unless listed above) may be made three months after this policy has been revised unless they are driven by a major life decision.

ILikeDividends

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Re: Post Your Investment Policy
« Reply #1 on: September 13, 2018, 12:35:20 AM »
Sheldon Cooper?

(Sorry, I couldn't resist)
« Last Edit: September 13, 2018, 12:41:23 AM by ILikeDividends »

appleshampooid

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Re: Post Your Investment Policy
« Reply #2 on: September 13, 2018, 10:28:11 AM »
Mine's in a tab of my AA spreadsheet on google docs. Not the best for formatting, but keeps the decisions and the AA target percentages in the same place.

It's not as long as other people's, no call out to how *much* we should be investing, but my wife and I are both frugal MMM-types, so we save a lot and all excess funds past the EF or anything goal-based (none right now, but probably a car in the medium future) go into investments governed by the policy.


NorCal

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Re: Post Your Investment Policy
« Reply #3 on: September 14, 2018, 08:55:27 AM »
Sheldon Cooper?

(Sorry, I couldn't resist)

Sorry, I didn't mean for it to come off that way.

I've just seen so many responses to investment questions come down to "what does your investment policy say?".  And that is usually a great answer.

I just haven't seen any posts explaining what a good investment policy should look like, or any good examples.

I thought it would be great if we could get a collection of policies from different people with different risk tolerances (and at different life stages) to demonstrate what other people are actually doing.

I know my investment policy differs from a lot of the conventional wisdom here, but it works well for me and my risk tolerances.  I had to learn some hard investing lessons before I figured out what my real risk tolerance was.

NorCal

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Re: Post Your Investment Policy
« Reply #4 on: September 14, 2018, 08:57:22 AM »
Mine's in a tab of my AA spreadsheet on google docs. Not the best for formatting, but keeps the decisions and the AA target percentages in the same place.

It's not as long as other people's, no call out to how *much* we should be investing, but my wife and I are both frugal MMM-types, so we save a lot and all excess funds past the EF or anything goal-based (none right now, but probably a car in the medium future) go into investments governed by the policy.



I like that.  Simple, and it meets your goals.

Out of curiosity, how did you decide on the 75%/25% split for international?

ILikeDividends

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Re: Post Your Investment Policy
« Reply #5 on: September 14, 2018, 02:39:56 PM »
Sheldon Cooper?

(Sorry, I couldn't resist)

Sorry, I didn't mean for it to come off that way.


No harm, no foul.  I've been binge-watching old episodes of The Big Bang Theory over the last few months.  I never watched it when it first aired, and now I'm hopelessly addicted to the show.  I was watching an episode when I read your OP, and I couldn't help imagining a similarity between your IP and one of Sheldon's 25 page room mate agreements covering every imaginable eventuality, all the way down to a rigorous bathroom schedule.  In my head, it was Sheldon's voice reciting your IP to me.  I got a good chuckle.  Not intended as a dig against your IP; which seems well planned and quite thorough to me. ;)

I manage an optimized AA in a spreadsheet, but I don't have a written IP; otherwise, I'd post it.
« Last Edit: September 14, 2018, 02:52:17 PM by ILikeDividends »

appleshampooid

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Re: Post Your Investment Policy
« Reply #6 on: September 14, 2018, 08:01:59 PM »
Mine's in a tab of my AA spreadsheet on google docs. Not the best for formatting, but keeps the decisions and the AA target percentages in the same place.

It's not as long as other people's, no call out to how *much* we should be investing, but my wife and I are both frugal MMM-types, so we save a lot and all excess funds past the EF or anything goal-based (none right now, but probably a car in the medium future) go into investments governed by the policy.



I like that.  Simple, and it meets your goals.

Out of curiosity, how did you decide on the 75%/25% split for international?
It was a comprise between my misgivings about needing international at all, conventional wisdom, and my wife's input. After reading JL Collins's article on international in addition the comments by Bogle and Buffet that are often thrown about, I had convinced myself to ditch international completely. Then I thought back to diversification and The Intelligent Asset Allocator and how all the big firms' balanced funds have a large int'l chunk. So I swung back to thinking about weighting it by market-cap. When discussing with my wife (who generally takes a hands-off approach to our investments leaving it to me, but I give her the broad strokes), she fell more on the side of my original thoughts (no international). So we compromised and ended up where we are now :).

flipboard

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Re: Post Your Investment Policy
« Reply #7 on: September 15, 2018, 02:55:51 AM »
My policy is a bit simpler - I decided to only put investment allocations/rebalancing details in there: my general life plan is save as much cash to invest as possible, and and I don't bother predicting any dates because who know if I'll get fired/become ill/etc.

Tax advantaged accounts aren't a huge thing where I live (OTOH there's no capital gains tax, so I only get taxed on dividends). Hence I've only looked at post-tax investment in my policy (I am maxing out the tax-advantaged options that are available, but relative to my income I can't put much in there - I'm using those accounts to save cash towards a house downpayment in a few years where I can withdraw from the tax-advantaged account, the investment options available in tax advantaged accounts are highly restricted so cash for housing seems like the best choice.)

My policy:
19.5 % Europe
19.5 % Pacific
10 % Emerging
50 % US
1% China (my emerging already contains china, but I added some more for fun)

Each of those is then split into 60% total-market index, 40% small-cap value. (It would be possible to calculate exact large/mid/small cap percentages, but this approach is easier and is Ferri approved [1].) As I couldn't find good Europe or Pacific SCV ETF's, I added those together to buy a Developed SCV ETF - if that changes in future, I might split them again.

I top-up my investments every 3 months, on a fixed date. No funds are sold when topping up, except for 1x per year when I do a full rebalance. (Since I'm still near the beginning of my investing timeline, cash inputs are quite significant compared to already existing assets, so I'm unlikely to have to do any selling to reach my target allocations - I expect that to change once my invested assets are larger, at which point I'm explicitly restricting myself from exactly matching target allocations except on the yearly rebalnce date, but when topping-up I'm still going to top up towards my target allocations.)

[1] https://www.etf.com/sections/index-investor-corner/22700-rick-ferri-to-tilt-or-not-to-tilt.html?nopaging=1

Sailor Sam

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Re: Post Your Investment Policy
« Reply #8 on: September 15, 2018, 06:08:56 PM »
CASH
1. $500 in bullion
2. $10,000 in savings account

INVESTMENT ORDER OF FUNDING
1. Fully fund traditional TSP = $18,500
2. Fund traditional IRA up to tax exemption limit ~$2,000
3. Fund Roth IRA with remainder ~$3,500
4. $5,500 per month to Vanguard after tax account ~$41,250

PHILOSOPHY
1. First is charity @ 10% net ~$9,000
2. Maximize tax sheltered retirement funds first
3. Once retirement is full, push savings into to after tax Vanguard Brokerage account
4. Unspent allowance to savings account at end of pay period
5. Balance > $10,000 in savings account to Betterment at end of calendar year
6. Savings maximum is $60,000/year. Extra funds to charity.

ALLOCATION
1. TSP = L2050 fund
2. IRA = 90% VTSAX stock, 10% VBFMX bond
3. Betterment = 90% stock, 10% bond
4. Vanguard = 90% VTSAX stock, 10% VTIAX international stock
5. Overall allocation = 10% cash, 10% bonds, 80% stocks
6. Rebalance yearly with infusions, not selling


Full_Beard

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Re: Post Your Investment Policy
« Reply #9 on: September 15, 2018, 07:14:36 PM »
INVESTMENT ORDER OF FUNDING
1. Fully fund traditional TSP = $18,500
2. Fund traditional IRA up to tax exemption limit ~$2,000
3. Fund Roth IRA with remainder ~$3,500
4. $5,500 per month to Vanguard after tax account ~$41,250
That $5,500 is impressive. Typo? I ask because there are income limits to funding IRAs with the TSP and if you're below those and still contributing $66K per year to an after-tax account, that's got to be like an 85% savings rate.

Me:

1. Fully fund TSP -- split between traditional and Roth, though soon will be 100% Roth. All in C and S funds.
2. Fully fund 403(b) -- wife. In SP500 Index fund and one international fund.
3. Use to fully fund Trad (wife) and Roth (me) IRAs, but I think this year, we're income-limited out, or at least unable to make full contribution. All IRA monies are invested in stocks (V, BR, BRK-B, AAPL, COST, TTC, ALK).

Total balance from all retirements accounts = $1.25M.

4. $500 per month in after tax account (that goes to SP500). Taxable account includes $25K in SP500, $85K in stocks (V, BR, COST).
5. $150 per month plus grandparent xmas money in 529s and Coverdale IRAs. Aim to have about $80K per kid come college.
6. Mortgage (2.75% interest) will be paid off in 8 years.
7. Student loans will be paid off in 2 years.

And since work is an investment policy of my time, I hope to cut work hours to 32/week in 3 years and then 24/week in 10 years. I'll stop if/when my utility value drops to worthless.

I am 100% equities and don't see that changing anytime soon. I'll hold through the upcoming down cycle(s), though there are some interesting articles about the CAPE index and q index that tempt me to convert large portions of my holdings to cash.
« Last Edit: September 15, 2018, 07:32:52 PM by Full_Beard »

Steeze

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Re: Post Your Investment Policy
« Reply #10 on: September 15, 2018, 07:30:24 PM »
Here is a link to copy in a google doc:
https://docs.google.com/document/d/1Ht4t7kFTS-SAt7xmyd6k8ei8jVzU64lM81CHTk3JZ_E/edit?usp=sharing

FWIW my current allocation is:
57%     US
12%     Developed International
6%       Emerging Markets
12.5%  REITs
12.5%  Bonds

The only fund in my 401k with <2% fees is a US total market fund (@1.7%) so this throws off my allocation a bit.

Investment Policy Statement

Investment Philosophy:
Buy-and-hold long-term
“We buy on Thursdays and sell when we need the cash for groceries”
Use Low Cost All-market-index ETFs or Mutual Funds
Use a Tax Efficient Strategy
Maximize Tax Advantaged  Accounts Prior to Taxable Accounts
Financially Independent when Cash = 1 years living expenses,   Taxable Accounts = 5 years living expense, and Total value of all accounts is = 25 years living expense
Target F.I. Date = 2030(42 y.o.)
Invest a minimum of 50% of Gross (Pre-Tax) income
Revisit target allocation when within 5 years of retirement for start of Bond Tent

Risk Tolerance
Portfolio risk has been assessed and tested against available historical data in the selection of target asset allocation. My risk tolerance is generally very high and I feel well suited for high volatility. My wife would like to reduce some risk so we have included a modest bond allocation.

Asset Allocation:
Strategy: Modified Swensen’s Lazy Portfolio

Stocks:      70%    (35% US, 20% Dev. ex US, 15% Em. Markets)
Bonds:      10%    (100% US Bond Index)
REIT:      20%    (100% Global REIT Index)*

*Primary residence shall not count toward real estate allocation, however, any real estate equity investment which produces positive cash flow will be included in this percentage.

Investment Order:
High Interest Savings      3 month expenses max
HSA                    If applicable
401k                    After employer match, up to max allowable
Traditional IRA         If in 12%+ tax bracket (dependent on income limits)
ROTH IRA                 if in <12% tax bracket (or tIRA is not an option)
Taxable            After other accounts are fully funded

Target Allocation:
(or equivalent)

SPTM        35%     Total US Stock Market Index         Taxable & 401k
SPDW       20%   Developed World ex-US Index       Taxable
SPEM        15%   Emerging Markets Index                Taxable
REET       20%   Global Real Estate Index                  ROTH / IRA / HSA
SPAB       10%   US Bond Market Index                     ROTH / IRA / HSA / 401k

Contributions & Rebalancing
Contributions will be made automatic with the exception of windfalls, bonuses, or tax returns which will be invested immediately in a lump sum. Purchases will be made weekly with disregard to current market conditions. All accounts will be set to DRIP dividends.
Rebalancing where sales are required will occur yearly around my birthday or if target allocation is off by +/-10% (unless otherwise restricted due to funds options in our 401k)

Comments
Portfolio is intentionally overweight emerging markets and has a lower bond percentage than Swensen’s Lazy, also uses a total bond market fund instead of TIPS & Treasuries. Cash component is ignored. We keep a fixed 3-month living & discretionary expense emergency fund in cash.
May also look into tax loss harvesting as a hobby in the future.
« Last Edit: September 15, 2018, 07:38:08 PM by Steeze »

Sailor Sam

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Re: Post Your Investment Policy
« Reply #11 on: September 15, 2018, 07:39:01 PM »
INVESTMENT ORDER OF FUNDING
1. Fully fund traditional TSP = $18,500
2. Fund traditional IRA up to tax exemption limit ~$2,000
3. Fund Roth IRA with remainder ~$3,500
4. $5,500 per month to Vanguard after tax account ~$41,250
That $5,500 is impressive. Typo? I ask because there are income limits to funding IRAs with the TSP and if you're below those and still contributing $66K per year to an after-tax account, that's got to be like an 85% savings rate.

I fill the TSP and IRA buckets first, which takes about 3.5 months. After that, I switch to the after tax account for the remainder of the year. So it's 'only' about $40k into Vanguard.

Including charity, I'm around 62% savings of gross. Or 55% without counting charity. But I'm kinda cheating via a high income. I still spend $30k per year.

ETA: I'm uniformed, so a big chunk of my income is also exempt fro AGI. That helps too ;)
« Last Edit: September 15, 2018, 07:52:39 PM by Sailor Sam »

NorCal

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Re: Post Your Investment Policy
« Reply #12 on: September 15, 2018, 07:46:13 PM »
I am 100% equities and don't see that changing anytime soon. I'll hold through the upcoming down cycle(s), though there are some interesting articles about the CAPE index and q index that tempt me to convert large portions of my holdings to cash.

This reminds me of my mindset in 2007.  Mostly about how I made some stupid investing decisions going into the downturn (I'm not saying you are making stupid decisions, just sharing my own).

Around 2007 I was finally able comfortable with investing on my own.  I was studying for my MBA and interning at a venture fund.  Of course, everyone at the venture fund invested their own money and talked stocks all the time.  I took tons of stock tips from them, and shared my own.  I knew that I was a long term investor, and planned to never sell.

Well, when 2008 hit and my portfolio of internet backhaul companies, Peruvian copper mines and Aircraft Leasing stocks lost ~70% of its value, I learned my risk tolerance wasn't really what I thought it was.  While I didn't sell at the bottom, it wasn't far from it.

I learned that risk tolerance is always lower than you think it is.  If you think you might re-assess risk tolerance, it's a good idea to do it when the markets are doing well.


Full_Beard

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Re: Post Your Investment Policy
« Reply #13 on: September 15, 2018, 11:27:38 PM »
I am 100% equities and don't see that changing anytime soon. I'll hold through the upcoming down cycle(s), though there are some interesting articles about the CAPE index and q index that tempt me to convert large portions of my holdings to cash.
Peruvian copper mines and Aircraft Leasing stocks lost ~70% of its value, I learned my risk tolerance wasn't really what I thought it was.  While I didn't sell at the bottom, it wasn't far from it.
Well, I wouldn't touch that stuff -- you were going for the big money with those picks? Look at what Costco, Visa, and Toro did during that time period. Dropped and recovered in tandem with the SP500 though on a higher upswing. So my value went down and then came back. That's going to recur in my lifetime, and I know I'm not savvy enough to time it. I am, however, patient enough to wait it out.

I can't even access the retirement accounts for 15 years, so my only option is patience.

flipboard

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Re: Post Your Investment Policy
« Reply #14 on: September 15, 2018, 11:49:18 PM »
<..snip..>

I learned that risk tolerance is always lower than you think it is.  If you think you might re-assess risk tolerance, it's a good idea to do it when the markets are doing well.
As a young investor, this is my main concern. It's also why I'm hoping there's a downturn soon, so I can learn more about myself. (The damage is limited, even if I were to sell at the lowest of low... then the impact relative to future earnings is quite minor. That's not my plan, I plan to keep forever, but I've heard of enough people selling low despite such a plan so I'm going to wait and see what happens in an actual downturn.)

Full_Beard

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Re: Post Your Investment Policy
« Reply #15 on: September 16, 2018, 12:11:34 AM »
I fill the TSP and IRA buckets first, which takes about 3.5 months. After that, I switch to the after tax account for the remainder of the year. So it's 'only' about $40k into Vanguard.

ETA: I'm uniformed, so a big chunk of my income is also exempt fro AGI. That helps too ;)
You should check me on this (and it may be different for uniformed folks), but the federal gov't matching program for civilians (5% of your salary) is split among the 26 pay periods and most of it happens only when you actually contribute, so if you max out of the TSP in the first 4 months, you lose out on the government's 4% matching (and get only the auto 1% matching) -- whereas you'd continue to get the entire 5% matching if you contributed throughout the 26 pay periods.

Regardless, nice job saving.

Full_Beard

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Re: Post Your Investment Policy
« Reply #16 on: September 16, 2018, 12:16:22 AM »
Quote from: flipboard
As a young investor, this is my main concern. It's also why I'm hoping there's a downturn soon, so I can learn more about myself. (The damage is limited, even if I were to sell at the lowest of low... then the impact relative to future earnings is quite minor. That's not my plan, I plan to keep forever, but I've heard of enough people selling low despite such a plan so I'm going to wait and see what happens in an actual downturn.)
This is why I stay heavy in equities and just hold:

http://web.iese.edu/jestrada/PDF/Research/Refereed/Buffett-AA.pdf

And before you say it's Buffet, note that authors say that "this article evaluates the merits of the 90/10 allocation that Buffett advised for his wife, relative to other static allocations with different stock/bond proportions, for investors at large." In other words, that doesn't matter. You do, however, have to be patient and stomach(-ache) the downturns.

ditheca

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Re: Post Your Investment Policy
« Reply #17 on: September 16, 2018, 01:56:40 AM »
Keep it Simple Plan

Requirements:

I want $625,000 invested and my mortgage paid off when I FIRE.  I will likely continue to moonlight in tech or education, earning about $10k/year.

We hope to achieve FIRE by the time my youngest child graduates high school.

At no point will we incur any debt other than mortgage debt, unless we have liquid assets that could immediately pay off the debt.

We do not plan to contribute to our children's college funds. We will assist them in finding reasonably-priced education, scholarships, and employment.

Savings Plan:

We will contribute the maximum legal amount to my 401k and both IRAs every year.  Any additional savings will be donated to charity, invested in taxable accounts, or used to pay down our mortgage.

Allocation

We have very high risk tolerance.  All assets in 401k and IRA accounts will continue to be invested in VTSAX or a similar S&P500 index.

Rebalancing:

Ahahaha!

Plan Review:

We review our progress annually. If we decide our current asset allocation is suboptimal, we will correct it with new contributions and not by selling existing shares of S&P500 indexes.
« Last Edit: September 16, 2018, 02:27:54 AM by ditheca »

NorCal

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Re: Post Your Investment Policy
« Reply #18 on: September 16, 2018, 03:53:40 PM »
<..snip..>

I learned that risk tolerance is always lower than you think it is.  If you think you might re-assess risk tolerance, it's a good idea to do it when the markets are doing well.
As a young investor, this is my main concern. It's also why I'm hoping there's a downturn soon, so I can learn more about myself. (The damage is limited, even if I were to sell at the lowest of low... then the impact relative to future earnings is quite minor. That's not my plan, I plan to keep forever, but I've heard of enough people selling low despite such a plan so I'm going to wait and see what happens in an actual downturn.)

Risk tolerance is very personal.  No one really knows what their tolerance for losses is until they lose it.  I've personally never bought into the advice around here that a 100% equity portfolio is desirable (we can save that debate for another thread).

My recommendation for determining risk tolerance is as follows:
1.  Look at the size of your portfolio, and think carefully about how much you're willing to lose.
2.  Write down the amount you're willing to lose on a piece of paper.  Look at it, and think about what it would feel like if your portfolio lost that much money.  It's important to actually write it down on a physical piece of paper.
3.  Whatever you're willing to lose, hold 2X that in equities.  So if you're willing to lose $25K, you shouldn't have more than 50K in equities.
4.  If you have not invested through a recession before, reduce your equity allocation by 10 percentage points.


Sailor Sam

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Re: Post Your Investment Policy
« Reply #19 on: September 16, 2018, 05:55:03 PM »
I fill the TSP and IRA buckets first, which takes about 3.5 months. After that, I switch to the after tax account for the remainder of the year. So it's 'only' about $40k into Vanguard.

ETA: I'm uniformed, so a big chunk of my income is also exempt fro AGI. That helps too ;)
You should check me on this (and it may be different for uniformed folks), but the federal gov't matching program for civilians (5% of your salary) is split among the 26 pay periods and most of it happens only when you actually contribute, so if you max out of the TSP in the first 4 months, you lose out on the government's 4% matching (and get only the auto 1% matching) -- whereas you'd continue to get the entire 5% matching if you contributed throughout the 26 pay periods.

Regardless, nice job saving.

Your summary is correct for civilians, but uniformed doesn't get a match. Well, small qualification. The younger kids have just started getting a 5% match in 2018, in exchange for a lower pension multiplier. Your summary is correct for them, as well. But I'm too old to switch to matching, so I can front load to my hearts content.

Abe

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Re: Post Your Investment Policy
« Reply #20 on: September 16, 2018, 10:28:27 PM »
My Wife and My Investment Policy Statement

Philosophy: keep it simple.

Investment Plan:
Buy-and-hold long-term (FI goal of 2028) - $150k/yr for 10 years with 4% return
Primary goal of $2.5m for potential 4% withdrawal rate of $100,000
Second goal of working 3 more years to fund $1.0m in donor-advised funds.
Minimize fees with index funds, reinvest dividends
Rebalance once a year

Investment order:
1. Keep 1 year of cash in bank accounts until $1m reached, then 2 years.
2. Fund 529 plans for kids' college ($20k/yr)
3. Maximize retirement accounts ($36k/yr)
4. Remainder to taxable accounts ($114/yr)
5. Any bonuses or unearned income (gifts, inheritance) go to donor-advised fund.

Risk Tolerance
AA of 70% total stock market / 30% total bond market for investments during earning years, then 50/50 once FI goal reached.
Do not change asset allocation in downturn - continue as planned.

kenmoremmm

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Re: Post Your Investment Policy
« Reply #21 on: September 17, 2018, 11:02:26 PM »
I'll hold through the upcoming down cycle(s), though there are some interesting articles about the CAPE index and q index that tempt me to convert large portions of my holdings to cash.
care to share a cliff notes version of your findings?

Full_Beard

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Re: Post Your Investment Policy
« Reply #22 on: September 18, 2018, 12:21:08 AM »
Quote from: kenmoremmm
care to share a cliff notes version of your findings?
Not "findings," but here's the Shiller PE index:

http://www.multpl.com/shiller-pe/

Here's the q ratio info:

https://www.advisorperspectives.com/dshort/updates/2018/09/05/the-q-ratio-and-market-valuation-august-update

They both tell us that the market is over-valued. But I think everyone knows that. However, no one knows (some may be better at predicting) whether this means the market is going to provide lower but still positive returns over the next 2-4 years (say 1-5%), crash within the next 3 years, or break historical trends and continue to rise at exceptionally good rates.

Am I tempted to sell all and sit patiently on the sidelines for a while? Of course. Will I hold the course and just wait it out, including any downturn? Most likely.

NorCal

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Re: Post Your Investment Policy
« Reply #23 on: September 18, 2018, 09:14:53 AM »
Quote from: kenmoremmm
care to share a cliff notes version of your findings?
Not "findings," but here's the Shiller PE index:

http://www.multpl.com/shiller-pe/

Here's the q ratio info:

https://www.advisorperspectives.com/dshort/updates/2018/09/05/the-q-ratio-and-market-valuation-august-update

They both tell us that the market is over-valued. But I think everyone knows that. However, no one knows (some may be better at predicting) whether this means the market is going to provide lower but still positive returns over the next 2-4 years (say 1-5%), crash within the next 3 years, or break historical trends and continue to rise at exceptionally good rates.

Am I tempted to sell all and sit patiently on the sidelines for a while? Of course. Will I hold the course and just wait it out, including any downturn? Most likely.

I personally don't put much stock in using valuations to project returns over a 2-4 year time period.  However, they are a great way to project future returns on a 10 year time frame (roughly the business cycle).

Maybe stocks will go up or down over the next 2-4 years.  However, I'm confident in saying the forward 10 year returns will be much lower than 7%.

This is why I chose to split my excess cash flow 50/50 between mortgage paydown and market investing.  I don't know what the stock market returns will be, but I'm fairly confident the 10 year returns from here will be less than 7%, particularly on a post-tax basis.  Will they be greater than the 3.875% rate on my mortgage?  I don't know, but the mortgage paydown is risk-free.

2Birds1Stone

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Re: Post Your Investment Policy
« Reply #24 on: September 18, 2018, 10:02:42 AM »
Attached
« Last Edit: September 18, 2018, 10:05:12 AM by 2Birds1Stone »

Full_Beard

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Re: Post Your Investment Policy
« Reply #25 on: September 18, 2018, 12:39:39 PM »
Quote from: NorCal
This is why I chose to split my excess cash flow 50/50 between mortgage paydown and market investing.  I don't know what the stock market returns will be, but I'm fairly confident the 10 year returns from here will be less than 7%, particularly on a post-tax basis.  Will they be greater than the 3.875% rate on my mortgage?  I don't know, but the mortgage paydown is risk-free.

I think that's a perfectly reasonable and wise approach to spending excess cash flow.