The biggest investing mistakes are behavioural — panic-selling, chasing, tinkering. A personal Investing Policy Statement is the rulebook you write while calm, to follow when you're not. This skill drafts one: goals, risk tolerance, a target asset allocation, and the contribution/rebalancing rules that keep you on track. It's educational and generic — not personalized financial advice or a recommendation of specific securities.
Required Inputs
Ask for these only if they aren't already provided:
- Goals & time horizon — what the money is for and when it's needed (retirement in 25y, house in 5y).
- Risk tolerance — how they'd react to a 30% drop; capacity for loss; experience level.
- Current situation — roughly what's invested where, monthly amount to invest, account types available.
- Constraints / values — liquidity needs, ESG preferences, things to avoid.
Output Format
Investing Policy Statement — [name]
1. Purpose & goals — what this portfolio is for, time horizon, target.
2. Risk tolerance & capacity — a plain-language statement of how much volatility is acceptable and why.
3. Target asset allocation — broad asset classes with target % and a tolerance band (illustrative example, to adapt):
| Asset class | Target % | Rebalance band |
|---|---|---|
| Equities (broad, diversified) | % | ±5% |
| Bonds / fixed income | % | ±5% |
| Cash / short-term | % | ±5% |
4. Contribution rules — how much, how often, automated; the order of accounts to fill (e.g. employer-match first, then tax-advantaged).
5. Rebalancing rules — when (calendar or band-triggered) and how.
6. What I will NOT do — the behavioural guardrails (no panic-selling in a downturn, no performance-chasing, no market-timing, no single-stock gambles beyond X% of the portfolio).
7. Review cadence — when to revisit the IPS itself (e.g. annually or on a major life change).
Disclaimer — generic and educational; not individualized advice; consider a licensed fiduciary for personal recommendations.
Quality Checks
- Allocation is tied to the stated goals, horizon, and risk tolerance — not generic
- Allocation percentages sum to 100% and include rebalancing bands
- Contribution and rebalancing rules are concrete (amount, frequency, trigger)
- The "will NOT do" guardrails address real behavioural traps
- Diversification is the default; no specific ticker/security recommendations
- The educational / not-advice nature is stated
Anti-Patterns
- Do not recommend specific stocks, funds by ticker, or "hot" assets — stay at the asset-class level
- Do not set an allocation that ignores the stated time horizon (e.g. all-equities for money needed next year)
- Do not omit the behavioural guardrails — they're the point of an IPS
- Do not imply guaranteed returns or market-timing works
- Do not present this as personalized financial advice
Based On
The Investment Policy Statement framework (goals, risk, allocation, rules) used by advisors and DIY investors.