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Just a reminder: all terms should be on the Glossary Page if there is ever something you need a refresher on.
Investment Policy Statement (IPS)
A written document outlining your investment goals, risk tolerance, time horizon, asset allocation preferences, and guidelines for managing your portfolio. It serves as a roadmap for you (or your advisor) to make disciplined, consistent decisions and avoid emotional reactions during market volatility.
I’ve spoken about the IPS several times, but I wanted to make some adjustments to mine. These documents can be as simple as an email, which is what mine is, or a complex document that you maintain. The goal is that you don’t adjust it without long consideration and forethought.
Mine has always been simple: 60% Broad U.S.-based index funds, primarily S&P 500 and Total U.S. Stock Index. 30% International via Vanguard Total International Index (VXUS), and 10% Bonds via Vanguard BND.
With the advent of chasing passive income via dividends and this website, I’ve been focusing more on what is best for my portfolio at my age. I’ve actually missed out on a decent amount of growth running 10% of my portfolio in bonds, but I wouldn’t just spontaneously change my plan on a whim.
Since the Snowball Experiment was already altering my IPS, I figured it was time to truly inspect and decide what to do about the bond portion. My new goal allocation is 50% US Index, 30% international, 10% Dividends, and 10% REITs.
REIT: A REIT (Real Estate Investment Trust) is a company that owns, operates, or finances income-producing real estate. Modeled like mutual funds, REITs allow individuals to invest in large-scale properties—such as apartment buildings, offices, and hospitals—without needing to buy or manage the properties directly.
I contemplated a few different choices for swapping the bonds out, and while the Vanguard REIT (VNQ) is already included in VTI, this focus allows a little of the same balance against normal stocks that the bonds offered, with some more growth. The downside is that in a real estate crash, these can drop significantly.
As I still want to only rebalance only once a year in January, I only exchanged the BND shares for VNQ shares at Vanguard. When accounting for 401k contributions and the money I’ve been putting into dividends this year my actual balance is off slightly.
| Allocation | Current % | Expected % | Value |
|---|---|---|---|
| U.S. (VOO/VTI/QQQ) | 57.11% | 50% | $319,600.00 |
| International (VXUS) | 28.72% | 30% | $160,700.00 |
| REIT | 8.06% | 10% | $45,100.00 |
| Dividends | 6.11% | 10% | $34,200.00* |
Currently, I don’t apply the IPS to my wife’s accounts which sit at almost 100% VTI. I have started to migrate new contributions to her IRA at Robinhood into international, but I haven’t really seen a reason to micromanage even more funds on these accounts.
When combined, our totals break down as:
| Allocation | Current % |
|---|---|
| U.S. | 66% |
| International | 22.5% |
| REIT | 7% |
| Dividend | 4.5% |
That’s a pretty wide gap from my target IPS, but I plan on putting 100% of her IRA contributions this year into international. Which will move international up by 1% – and probably 2% if I get my own IRA done the same before January.
Another fun thing for anyone following my FIRE journey, this level of portfolio (ignoring my wife’s accounts) has a 4% safe withdrawal of $21,000 per year. With dividends approaching or occasionally surpassing $500 a month that would yield an income of $27,000 per year. That’s almost 50% of my FIRE goal from the budget article.
~~Miniwing~~
Investor, Parent, Optimist