| Investment Policy Statement xxxxx dated xx/xx/xxxx | |
| Age: xxFinancial Life Stage: ACCUMULATIONFamily Status: xxxx MARRIED 1 STEPDAUGTERRisk Tolerance: HIGH | |
| Investment Philosophy: | We would like a well-diversified, moderate portfolio. We will manage it ourselves, keeping it simple so that wife can manage it as well as husband. We both will retire from full time work sometime in xxxx or xxxx. Over the next five years we will gradually reduce our stock mutual fund holdings and increase our bond holding to the point that bonds = our average age. If we do well enough so that we have no need to take risk we will reduce our equity holdings to 30% of our total investment portfolio. As we retire and have the ability to do so, we will also reduce the number of accounts we have. |
| Financial account information | Where are your financial assets located? How much is in tax-advantaged accounts (IRA, Roth IRA, 401(k), etc) versus taxable accounts? How much will you be contributing to these accounts |
| Investment Goals & Objectives: | These are my main objectives for my investment program. I have developed them after a review of my financial resources, financial goals, asset allocation, risk tolerance and time horizon. Objective 1: To retire at the age of xx Objective 2: To have an annual income from my investments of at least $xx,xxx after taxes and in today’s dollars (inflation assumed to be 3.0 percent yearly) Objective 3: To leave a meaningful inheritance of $xxx for my children Objective 4: To minimize potential tax liabilities Objective 5: To monitor portfolio allocation against holding limits, to benchmark returns against expectations, and to consider revisions to portfolio as personal situation may dictate |
| Risk Tolerance: | My ability to tolerate the uncertainties, complexities and volatility inherent in the investment markets has been considered in the development of this investment program. The main factors that have influenced my risk tolerance and asset allocation are: age, present financial condition, specific financial goals, discretionary income and its variability, past investment experience. |
| Asset Allocation: | Maintain overall xx% stock + xx% fixed-income allocation until home purchase to accommodate both short-term and long-term requirements. Assets should be diversified across major asset classes including domestic equity, international equity (20-25% of equities), conventional bonds of short to intermediate term, and TIPS (50% of fixed). |
| Holding Limits: | My portfolio was developed subject to certain holding limitations. These are limitations on the minimum and maximum percentage investment in each asset class: Large Cap U.S. Equities (15-30 percent) Mid Cap U.S. Equities (10-25 percent) Small Cap U.S. Equities (5-15 percent) Foreign Equities (5-15 percent) REITs (0-15 percent) Inter-Term Govt Bonds (10-25 percent) Corporate Bonds (0-10 percent) Cash and Cash Equivalents (5-20 percent) |
| Target Allocation: | Based on my financial resources, financial goals, time horizon, tax status, holding limitations, and risk tolerance a recommended portfolio was determined. The portfolio balances risk and reward and attempts to achieve the stated objectives of the investment program. The initial asset allocation is: Large Cap U.S. Equities (25 percent) Mid Cap U.S. Equities (10 percent) Small Cap U.S. Equities (5 percent) Foreign Equities (15 percent) REITs (10 percent) Inter-Term Govt Bonds (25 percent) Corporate Bonds (5 percent) Cash Equivalents (5 percent) Gold or other precious metals (xx percent) Hedge funds, hedged strategies, managed futures (xx percent) |
| Selection Criteria: | Investment portfolios used to implement the investment program shall be subject to specified selection criteria and shall be monitored for adherence to my investment policy guidelines, major changes in the portfolios and comparative performance with similar investments. I prefer to use individual stocks and / or ETFs as the primary investment vehicle for this IPS. If mutual funds are used, the expense ratio and overall cost of funds shall be a major point in the selection criteria. To minimize style drift, index funds are preferred, if available, for all asset class (this last statement only if you believe the Efficient Market Hypothesis otherwise you may choose “active management” of stocks/ETFs/mutual funds). |
| Review Process: | My investment performance will be monitored and reported on a quarterly basis and will be compared against the appropriate benchmarks. The investment program will be reviewed at least annually to make sure that it continues to achieve his stated objectives. Since this investment program is long-term in nature, the periodic adjustments made to his investment program should be small. |
| Rebalancing: | The percentage weighting to each asset class within the investment portfolio will vary. The percentage weighting within each asset class will be allowed to vary within a reasonable range of plus or minus an absolute 5 percent or 10 percent of the original allocation amount; whichever is triggered first. To minimize taxable events when rebalancing is required, dividends and net cash inflows will be used to meet the strategic asset allocation targets. If cash flow is not sufficient to meet the target allocation for an asset class, I will decide whether to effect transactions in order to rebalance the asset allocation. |
| Other considerations: | Automate future contributions wherever possible. Rebalance yearly. No market timing. Exact sub-allocations are not as important as maintaining the overall xx/xx stock/fixed allocation – no need to make things complex in order to meet sub-allocation targets. |
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