Every client of the firm has a written investment policy before a single trade is placed. It is a few pages long, written in plain language, and it is the most important document in the relationship. Institutions have used them for decades; most private investors have never seen one. This is what goes in it and what it is for.
What it says
- Purpose. What the money is for, in order: the reserve that must never be at risk, the spending it funds, the growth it should produce, the people it must outlast. Everything else follows from this paragraph.
- Allocation. How the portfolio is divided between the reserve, the core and the thematic sleeve, with a range around each so that ordinary market movement does not require a decision.
- Limits. The most any single theme, position or asset class may be. The limits are the policy’s answer to concentration: they are set when everyone is calm and applied when nobody is.
- Liquidity. How many months of spending stay in cash and short-term instruments, so that a bad year in markets never forces a sale at the bottom.
- Rebalancing. The rule, not the feeling: when an allocation drifts outside its range, it is brought back, which means trimming what has risen and adding to what has fallen.
- Structure. Which accounts hold what, and why: taxable and retirement accounts, trusts, entities. Estate planning lives here, as the structure the portfolio sits inside rather than a separate project.
- Review. When the policy is revisited: every quarter against the numbers, and immediately when life changes.
What it is for
A policy does two things. It turns a conversation about hopes into a set of decisions that can be checked, so that every quarterly report is an answer to the question “did we do what we said?” And it protects the plan from its owners, including us. The moments that damage wealth are rarely ordinary ones. They are the week the market falls fifteen percent, the year a theme runs hot, the month a sale closes and the cash feels like it needs to do something. The policy was written before those moments, by the same people, with a clear head. In the moment, it is the thing that says: this was anticipated, here is what we agreed.
How it is written
Together, in the first weeks of the relationship, from the discovery conversation. We draft; you read it and change what is wrong; nothing is implemented until you have approved it. It is yours. If you leave the firm, it goes with you, and any adviser who follows should be able to pick it up and carry on.
If you have never had one, writing it is the first thing we would do together, and it is useful whether or not you go on to hire us.
This material is for informational purposes only and is not a recommendation to buy or sell any security. All investing involves risk, including loss of principal.