A key component of any financial plan includes an investor policy statement (IPS). The idea is to identify objectives, map a route to reach them, and detail the logistics in a manner where you can hold yourself accountable to the plan you create.
This is critical because in defining a specific course of action you create a model to stick to during times of financial turbulence. The biggest threat to achieving your goals is your very human frailty. Hard-wiring that served our ancestors well when the goal was to escape a lion on the savanna (change course abruptly!) will hose you financially as a modern investor.
Since money is just a tool to enable the proper allocation of time, an IPS offers a valuable framework for allocating the more rare and important resource. Using an outline from the Bogleheads wiki, here is my proposed IPS for my time:
Investment Objectives:
- Develop deep, meaningful connections with family, friends and community.
- Develop a robust inner scorecard. Feel comfortable in my skin.
- Limit my attachment to and pursuit of stuff.
- Steward our family's financial resources responsibly.
- Give more than I take. Do what I say I will do.
- Advocate for those on the margins.
Risk Tolerance:
- Do good deeds even when no good deed goes unpunished.
- Remain vulnerable despite risk of getting hurt.
- Take opportunities to connect, learn or understand despite risk of appearing foolish.
Holding Limits:
- Don't give in a way that leaves my wife or kids shouldering the burden of my generosity.
- Time giving to proper rhythms in life. Give money when my kids are young, give time as they grow older and more independent.
- Disengage toxic personalities who manipulate via guilt or shame.
- Don't attend every fight I'm invited to.
Target Allocation:
- Be a value-adding husband to my wife. Grow together, create a shared vision of our future, compromise. Make her happiness a top priority. Appreciate her.
- Imbue my children with wings, imagination, resiliency, love of learning and a work ethic. Fertilize the seeds I'm given without trying to bend them to my will.
- Be loving and present as a son and brother. Establish healthy boundaries and reasonable expectations. Give without enabling.
Selection Criteria
- No flakes.
- Reliable, present, thoughtful, values-driven.
- Willing to speak truth to power.
Review Process/Rebalancing
- Quarterly and annual reviews to set goals and evaluate progress, preferably over a glass of wine with my wife once the kids are asleep.
- Implement periodic tweaks to course-correct as needed.
- Evaluate based on: happiness, balance, passion, fulfillment, growth, fitness, purpose.
Comments 4
Sounds more like a manifesto for living than a plan for investing. Personally I wouldn’t want “investing” that central to my life, but I didn’t have RE as an agenda. I retired when it was organically rational, in other words when I was done working. I didn’t know I was done till I was done. Investing made that decision possible. In the past 20 years it has become easy to acquire financial independence fairly automatically. Just set up the portfolio purchasing machinery and let the compounding machine do it’s thing. It will happen because when you buy a portfolio you are buying into the economic success of the nation. You are buying into your neighbors getting up every day and going to add some value to your investment and you pay them for their trouble. It’s a fair bargain. It’s a fair bargain because in working for a paycheck they off load their risk onto you. It becomes your responsibility to provide that paycheck come hell or high water. As it’s happening it’s worthwhile to plan contingencies like tax efficiency and lifestyle but when it gets down to it all you need from the portfolio is for it to buy a place to live and a meal.
I would separate all that other stuff like world peace and human harmony into a non investing basket. I may choose to put some effort and cash into my pet good causes and I do, and I’m certainly into loving my family and planning for their well being but all of that gets done apart from purchasing a portfolio and according to my ability. Purchasing a portfolio is about purchasing your future security once you no longer work. At least that was my approach.
Sorry, I read your premise after visiting that testosterone soaked boglehead wiki cult pecker measuring nonsense and totally missed your point. I read John Bogel for sure, the guy makes sense. Every book he writes is the same book but he makes sense and it’s good to touch the stone once in a while. Bogelheads appear to live in an electric kool-aid acid drenched social media caricature. Now I understand why everybody is so plussed about a 2 basis point fund cost, while leaving 88 basis points or more on the table due to crappy diversity and asset choice. Never read any bogelheads before. That wiki is the mother-load. Interesting sociology.
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Like any self-selecting group of eccentrics, if you can abide unusual personalities, there’s a ton to learn and a lot of givers interested in teaching. Their methods may be unusual, but I’ve been incredibly grateful that you can put up a post on the Bogleheads and have bright folks dissect a thought or premise with all the red ink you could hope for.
I thought it might be interesting to approach time with a comparable financial lens: what do I hope the returns will be, what activities will provide greatest ROI, should there be a glide path that changes with life stages, etc. Sometimes I shoot and miss my target, sorry if that was the case this time around.
I won’t rag on the bogelheads. I just got here by a different path and with different conclusions and optimizations but not vastly different. I’m as eccentric as anybody.
I never thought of using an optimizing scheme for my time or good will, although I’ve just lived a life of time optimization and within my means a commitment to the disadvantaged. I adopted 2 orphans who are the love of my life, next to my wife. I became involved in a charity where I supported 20 kids and old people who had no one. Nobody in poor countries have SS. If you don’t have a son to take care of you you’re pretty much hosed. I planted potable water wells all over central and south America and some in Africa. If you have potable water in a village, add a little salt and you have a chance to fight dysentery. If the water is 2 hours away the kid is dead. I backed sustainable goat herding, where if I bought you a breeding pair, you had to give a breeding pair away every year and so on. My motto is growth and healing are made out of protein. I built some housing in Haiti to get some families off the garbage dump and give them an address. It turns out to “pull yourself up” you really need an address and once a family had stabilized around an address, cousins and such would appear and use that address to stabilize their lives as well. I built a Church in India which stabilized a community, it became a school, and meeting place for the village as well as a place of worship. I supported friends who got laid off, guess I kind of just did what popped up. The multiplier effect in truly poor communities is automatic if you can supply the correct raw material.
I set aside 10%-12% and endeavored to be “need fund” broke at the end of the year. I always supported my 20 kids and always planted a well, but the rest came and went as I could afford it. So that was my plan, kind of an unplan. When I retired I did cut back considerably, but if things go right economically or I win the lotto “I’ll be back”.