The Investment Policy Statement — Why DIY Investors Should Have One

Professional asset managers are required to write down how a portfolio will be run before running it. DIY investors — managing their own six or seven figures — mostly keep the plan in their heads, where it is conveniently editable at exactly the moments it shouldn't be.

An Investment Policy Statement (IPS) is one page that fixes the plan while you're calm, so the plan — not the news — governs while you're not. It is the highest-return document per word in personal finance.

What one page must contain

1. Purpose and horizon. What this money is for and when it's needed. "Retirement from ~2050" and "house deposit 2029" are different portfolios; the IPS forces the separation.

2. Target allocation. The equity/bond/cash split per pot, with tolerated drift bands (e.g. 60% equities ±5). This is the sentence that does most of the work.

3. Contribution rule. How much, how often, fully automatic. "CHF 2,000 on the 26th, regardless of headlines" is a rule; "invest when things look sensible" is a mood.

4. Rebalancing rule. When drift exceeds the band, or on a fixed annual date: sell the overweight, buy the underweight. Mechanical, calendar-driven, boring on purpose.

5. The drawdown clause. The core of the document. "When the portfolio is down 25%+, I will: continue the monthly contribution, rebalance per rule 4, and change nothing else. I wrote this knowing such falls occur regularly and recover on horizons longer than mine." You are writing a letter to a future, frightened version of yourself — who will be looking for permission to sell.

6. Change control. The plan may only be amended with a 30-day cooling-off period, in writing, ideally with the partner's counter-signature. Life changes (child, house, career) justify amendments; red screens don't.

Why it works

Every documented investor failure mode — panic selling, performance chasing, "waiting for clarity" — is a decision made under stress that contradicts a decision made in calm. The IPS doesn't make you smarter; it makes your calm self senior to your stressed self. Couples get a second benefit: the document is where the household's actual risk appetite gets negotiated once, instead of renegotiated per crash (see risk capacity vs tolerance).

The Swiss frame

Include all pots in scope: 3a strategy and provider, the free portfolio, vested benefits if any, and the rule for windfalls (bonus season has its own failure modes — see the financial calendar). Note the annual admin dates directly in the IPS: 3a top-up by early December, rebalance in January when the pension certificate arrives.

What are you optimising for?

The IPS is where "what are we optimising for?" stops being a discussion and becomes a sentence with numbers in it.

Control question: if markets fell 30% next month, does a written sentence exist — today — that tells you what you'll do? If not, thirty minutes this week produces one. That's the whole assignment.