Publishing my Investment Policy Statement

One of the triggers for me creating this blog was an excellent post by LivingAFI about Investment Policy Statements.

For some years now, I have had various unwritten investment approaches that has been slowly evolving in my mind as I have learnt more about investing. But the idea of setting these approaches down in writing as one Investment Policy Statement appeals to me.  The next thing I thought is that I would like some input and help with it.  At which point I realised that the best source of input and help is the FI community that I have been avidly reading for ages.  So, dear readers, please help me critique my IPS – it’s here.

I’m going to set out my thinking behind each section of the IPS in a succession of blog posts.

2 thoughts on “Publishing my Investment Policy Statement”

  1. Hi FvL

    Your top level allocation target is 80% ‘Equities’ : 20% ‘Bonds’. Unless you are very young that seems to be a long way from the ‘Age in Bonds’ rule of thumb. What is your thinking here?

    In the spirit of full disclosure I first published my IPS in December 2009 and since that time it has been essentially unchanged. The only alterations have been a shift towards a HYP for a portion of my UK Equities and cash as I near FIRE in the next 12 months or so. The HYP is to ensure I can pay my ‘salary’ from dividends (I need total portfolio dividend yield to exceed 2.5%) and the cash is so I can buy a home outright. My nominal ‘Equity’:’Bond’ allocation is my Age-10 in bonds which I then flex based on CAPE values of key equity markets. That sees me today targeting 60% ‘equities’ as a 42 year old.



    1. RIT: interesting question.
      I am very mindful of the ‘your age in bonds’ yardstick. My investment portfolio consciously has a lower bond allocation for two key reasons:
      1) I can tolerate the risk of a drawdown. Warren Buffett says his allocation is 10pc bonds, and he is almost 90. How come? Because even with a large drop in equities his lifestyle is unaffected. I have some way to go to match Buffett (!) but likewise I think even a 40pc drop in portfolio value would be sustainable, albeit psychologically challenging. Maybe that would push me out of London, after all…
      2) Other assets. My IPS refers to my investment portfolio. This does not include illiquid assets, including a) buy-to-let b) commercial property 3) my principal residence 4) private equity i.e. shares in private companies. Of these I do have buy-to-let and commercial property; I consider these to have some fixed-income characteristics (certainly they produce a fixed income in the short term). If I allowed for them my allocation would be closer to bonds-%-at-my-age.
      What do you think: is this thinking sensible?


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