Investment Policy Statement

Investment Policy Statement

Disclaimer: I reserve the right to tweak my IPS statement if I give myself a two-week notice. However, what I won’t do is sell when the market corrects and/or crashes. Notice I said when because corrections and crashes are inevitable. As history has shown us, the market rebounds and when you look at it in the long-run, there are many dips but it always goes up. The key to investing in the market is to use it as a long-term investment strategy.

Goals

  • Achieve financial independence by the time I’m 60 years old. I’m a late gamer and just got serious about investing at the beginning of 2018 (current age 45).
  • Get into the real estate market within the next 5 years.
  • Grow alternate streams of revenue.

There are three asset classes to invest in:

  1. Paper asset class
  2. Real estate asset class
  3. Business asset class

Paper Asset Class

My current investment strategy is heavily weighted in the paper asset class.

Emergency Fund

I have an emergency fund in an Ally online savings account with a current APY of 1.9%. This fund is enough to cover 6 months of expenses. I call this my POM (Peace of Mind) fund. Additionally, my POM fund has enough extra money in it to buy a new used car when my current old car dies.

Investments

I invest in low-cost index funds.

I am currently maxing out 3 different tax-advantaged accounts:

  1. Employer-sponsored Simple IRA
  2. Roth IRA
  3. Health Savings Account

Additionally, I have recently opened an after-tax brokerage account where I plan to diversify my funds.

Asset Allocation

I have an annual review scheduled which will include the rebalancing of my funds to maintain an asset allocation of 90% equity funds/10% bond funds while I’m in the wealth accumulation phase.  I do not consider my cash bucket here. Currently, my invested asset allocation consists of:

  • 81% U.S. Stocks
    • ~95% Large Cap
    • ~5% Mid Cap
  • 5% International Stocks
    • 100% Developed Markets
  • 14% Bonds
    • 100% U.S. Bonds

Investment Accounts

  • Vanguard employer-sponsored simple IRA consisting of Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) and Vanguard Total Bond Market Index Fund Investor Shares (VBMFX).
  • Vanguard Roth IRA consisting of Vanguard FTSE Developed Markets ETF (VEA) and Vanguard Mid Cap ETF (VO).
  • Health Savings Account (HSA) with Health Savings Administrators consisting of Vanguard Total Stock Market Index Admiral Shares (VTSAX).
  • M1 Finance – funds yet to be purchased.

Real Estate Asset Class

My plan is to enter the real estate market within the next 5 years. I’m currently growing my POM fund to include monies for a down payment on a property. Most likely I’m considering a duplex so that I can house hack by living in half while renting half.

Business Asset Class

I plan to grow my blog and am thinking about how I can most effectively help others with my experiences and skillset. Furthermore, I’d like to see if I can grow a revenue stream from my passion projects.

Investment Philosophy

  • I employ the buy and hold strategy with passively managed index funds.
  • Keep expense ratios low
  • Max out tax-advantaged accounts
  • Investing in individual stocks is fine if I take the time to learn about the company. Furthermore, I will invest no more than 5% of my investment portfolio in individual stocks.
  • As I approach the wealth preservation phase I will become more heavily weighted in bonds as well as cash.
  • If I wish to make a change to my IPS or investment strategy, I must wait two weeks before taking action.
  • Stay the course and do not panic during market corrections and/or crashes.