Chasing short term market conditions adds a lot of risk to reaching your long term investing goals. An investment policy statement (IPS) can help ensure you stick to your strategy, and avoid market timing and other investing pitfalls. In this episode, Eric talks with Jason about his IPS, and why he finds it such a useful tool. Topics covered include defining portfolio makeup + objectives, the mechanics of cash generation + rebalancing, and why you might consider implementing an IPS yourself. See the link below for the show notes, where we link to all the content we referenced in the episode.
Show notes may be found below the video
- While our portfolios have changed a bit since, if you haven’t watched our previous episodes on asset allocation (part 1 and part 2), this is relevant material to our discussion here.
- Jason’s IPS defines his cash holding + generating practices. For more discussion on the topic of holding cash, you’ll want to check out this recent episode on the topic.
- Do you have a copy of our free Rebalancing Calculator? Whether you have an IPS or not, this simple tool can help you make decisions about buying and selling in order to rebalance your portfolio.
Jason’s Investment Policy Statement (IPS) is the document we walk through in this episode. If you’d like to see the full copy, you can check that out here. To make your own editable copy, go to File >> Make a copy and this will save to your own Google Drive as long as you are logged in to a Google account.
For more information on Investment Policy Statements (IPS) , check out this entry on the Bogleheads wiki. This page also shares forum user Sunny’s simple IPS which we showed in this episode, along with information on a simpler “investing plan” alternative to the IPS.
How to Create an Investment Policy Statement is a great introductory piece by Morningstar’s Christine Benz. This article also links to a simple IPS template provided by that you can use to for your own portfolio.
Risk Tolerance is a topic we discussed in this episode, and specifically, risk assessment evaluations that often are part of working with financial advisors. There are lots of tools online for this purpose, and this quiz from the University of Mississippi was among the best we found. Check it out and see how risk tolerant you are!
You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.