Investment Policy Statement Update

I have ranted about my investment policy before here but reading one of my favourite bloggers talk about it recently had got me thinking about it so more. What I realised was that I didn’t really create a formal statement about my investment policy. That’s probably sometimes my investments seem a little incoherent. So today’s rant is about formalising my investment policy into a statement that I can use as a reference.

You should check out his post on it here.

Investment Policy Statement

I will be keeping the latest version of my Investment Policy Statement here.

I am still in the accumulation phase of my investing journey so I’m going to follow something similiar to Doom’s accumulation phase investment policy statement.

Objective: Financial Independent (FI) by 40. FI means having enough passive income to cover my family’s expenses excluding wants like holidays and hobbies. Passive income will be generated from a combination of rent, interest and dividend income.
Philosophy: Value Investing. Invest in assets that provide the most value in terms of return relative to risk. Return includes time taken to research and manage investments. I don’t believe in superannuation so I completely ignore it.
Asset Allocation: 65% Equities. 35% Real Estate. No bonds, don’t need the stability at the moment. Flexible with allocation somewhat. Allocation to equities may decrease and be replaced with cash depending on market cycles. Consider rebalancing once a quarter.
Accounts: Use of a discount broker with the lowest fees. Real estate will be restricted to Australian residential properties.
Target Allocation: Equities Allocation. 50% low-cost Index ETFs, 30% Listed investment companies (LICs) and 20% Single Stocks. Having have my equities allocation in index funds reduces the time burden. LICs require a bit more time to manage but a geared towards capturing opportunities in market inefficiencies. Single stocks allocation allows me to still select stocks that are substantially undervalued every now and then.

This policy shouldn’t change much over the next 13 years when I reach 40. The statement is not as detailed as I usually am but I don’t want too specific and change it too often.

Do you have an investment policy statement? What is it and how does it differ to mine?


Disclaimer: : I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it. Please note that all investments carry some risk. You should be aware that the value of your managed investment may not increase as quickly as expected, if at all, or that the value may go down.  I have no business relationship with any company whose stock is mentioned in this article.

Steven