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 5-10 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. Additionally, I have the other following savings accounts with Ally:

• Car Fund (for when my old car dies)
• Automotive Maintenance (including insurance)
• Vacation and Skiing
• House Hack (future)

Investments

I invest in low-cost index funds.

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

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

In 2018, I did max out a Roth IRA but switched to a traditional IRA in 2019.

Additionally, I have recently opened an after-tax brokerage account with M1 Finance where I invest in blue-chip stocks.

Asset Allocation

I have an annual review scheduled which will include the rebalancing of my funds to maintain an asset allocation of ~80% stocks/20% bonds while I’m in the wealth accumulation phase.  I do not consider my cash bucket here. Currently, my invested asset allocation consists of:

• ~77% U.S. Stocks
  • ~78% Large Cap
  • ~3% Mid Cap
  • ~17% Small Cap
• ~5% International Stocks
  • ~12% Developed Markets
  • ~88% Total World Stock Index Funds
• ~14% Bonds
  • 100% U.S. Bonds
• ~3% REITs

Investment Accounts

• Vanguard employer-sponsored simple IRA consisting of Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), and Vanguard Real Estate Index Fund Admiral Shares (VGSLX).
• Vanguard Traditional IRA consisting of Vanguard Small-Cap Growth Index Fund Admiral Shares (VSGAX) and Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
• Vanguard Roth IRA consisting of Vanguard FTSE Developed Markets ETF (VEA), Vanguard Mid Cap ETF (VO), Vanguard S&P 500 Index ETF (VOO), and Vanguard Growth ETF (VUG).
• Health Savings Account (HSA) with Fidelity consisting of Fidelity 500 Index Fund (FXAIX).
• M1 Finance – blue-chip stocks.

Real Estate Asset Class

My plan is to enter the real estate market within the next 5-10 years but I’m currently investing in a REIT (Real Estate Index Fund). I’m most likely purchasing a duplex so that I can live in half and rent the other 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.