“Avoiding the dumb things is the most important. Learn more, know limitations, avoid the dumb things.”

– Warren Buffett

I think everyone loves talking investing, so today we're on it! Let's help you create an investment policy statement so that you can better manage your investments. Sound good? Read on! And when you're done, go download our template and build your own. - joe

The 411 on the effectiveness of a written financial plan:

36: Percentage of Americans who have a documented (written) financial plan.
96: Percentage of people with a written plan who say they feel confident they’ll reach their financial goals.
76: Percentage of planners who report feeling more in control of their finances after creating a formal plan.
43: Percentage of non-planners who say they “don’t have enough money” to justify making a plan.
25: Percentage of non-planners who say creating a plan seems too complicated, keeping them from documenting it.

Latest Stacking Benjamins Podcast Episodes:

Stop Making Simple Investing Mistakes With an Investment Policy Statement (SB1738)

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What Are YOU Worried About Financially? (LIVE From FinCon 2025) SB1737

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Stop Making Simple Investing Mistakes With an Investment Policy Statement (SB1738):

Stackers, today we are building the one-page lifeline that keeps you from making your worst money move on your worst market day. Your Investment Policy Statement is a calm-day plan that spells out what you believe, how you invest, and exactly what you will do when the market drops and headlines scream. It ties your investing to your real goals so you stop benchmarking against the S&P 500 and start measuring progress toward the life you want. It covers time horizons, risk, liquidity buckets, taxes, rebalancing rules, and who does what at home, so Future You follows clear directions instead of emotions. Write it now, sleep better later, and if you want a head start grab the IPS starter at stackingbenjamins.com.ips.

What an IPS is and when to write it

Your Investment Policy Statement is meant to be your rational guide that will keep your finances on track. No matter if we're in periods of economic panic or irrational exhuberience or anywhere in between, your IPS is there to be your levelheaded companion meant to guide your investment decisions throughout your investing life.

Emotions are detrimental to your investing success. History has proven time and again that making investment decisions based on raw emotions more often than not results in negative outcomes. Dig deeper into the psychology behind investing and learn how to avoid emotional investing by reading this piece from Investopedia (link).
Create your IPS. Learn how to create your Investment Policy Statement by reading our blog post from 2014 (link).
IPS Cheatsheet. Check out our Investment Policy Statement template to get a head start on creating your IPS (link).

Why it matters

The biggest mistake is selling when the market is down because there was no plan. Tie investing to your financial plan so you know the next move and can sleep better at night.

The curse of underperformance. It's a well-known fact in financial-nerd circles that most investors (retail and active mutual fund managers) chronically underperform the market. Learn more about why most investors underperform the market by reading this piece (link).
Investor psychology. Because money is such an important factor in everyday life, it is understandable that it extends beyond just numbers on a spreadsheet and into our conscious and unconscious decision-making. Dig into the psychology behind money decisions by reading The Psychology of Money by Morgan Housel. You can borrow it from your local library or grab your own copy of the book and support Stacking Benjamins by buying it through our Amazon Affiliate link (link).

Core Components

Here are the core components of your IPS:

Purpose and objectives that are specific and measurable.
Time horizons for each goal which inform risk and constraints.
Liquidity needs and where withdrawals come from if timelines change.
Risk tolerance and constraints including taxes.
Benchmarks tied to what you need to reach each goal rather than the S&P 500.
Governance that defines review frequency and who does what in the household.

Liquidity and buckets

Think in buckets for near term money and longer term money, then waterfall from longer buckets to refill shorter ones. You can even write rules for how to use cash during drawdowns so you are not guessing.

0-3 years: Near-term spending and surprises. Aim to keep about three years of cash so you can pause selling in downturns, cover big hits like a broken HVAC, and simply “run that baby dry” while markets recover, then refill later. If prewritten in your IPS, you might even drop a six-month reserve to three months during a 30 percent slide to deploy cash. Learn about 5 appropriate options for parking short-term cash reserves by reading this piece from NerdWallet (link).
3-7 years: The refill bucket. As the 0 to 3 bucket dips, waterfall from here to top it back up with no fixed timetable—you can automate most of it, hit pause during rough patches, and you still have years to backfill after a large expense. Dig deeper into what short- and intermediate-term investment portfolios look like by reading this piece written by our friend Christine Benz at Morningstar (link).
7+years: Long-horizon money. This bucket is not for current spending; it supports growth and later refills and is managed by your standing rules like annual rebalancing and any decline triggers you have written into your IPS. Learn 7 tips for long-term investing by reading this piece from Forbes (link).
Putting it all together: While we don't advocate for obsessively checking your portfolio balances frequently, it is useful to aggregate all of your finances into one dashboard view. We have recommended Monarch Money for years, because of its seamless integration of your financial accounts, cash flow tracking, and budgeting tools. Use our special link and use the promo code BENJAMINS to get 30% off your first year (link).

Taxes

While tax optimization shouldn't be your top priority, it is something to keep in mind whe formulating your portfolio and writing out your IPS. Let's dive into how to optimize for taxes and how to include tax planning in your IPS...

Tale advantage of preferred tax rates. In taxable accounts, understand the rules behind long-term capital gain and preferred dividend tax rates vs. short-term and ordinary income tax rates. Remember that these do not apply to investments held within tax-sheltered accounts (IRA/Roth/401k, etc.)...all traditional (pre-tax) money taken out from these accounts will be taxed at ordinary income tax rates. Check out this piece from Investopedia to learn more about the latest income and capital gain tax rates (link).
Investment placement. Not to get too deep in the weeds, but holding taxable bonds outside of tax-advantaged accounts is what's considered "tax inefficient investing," whereas holding tax efficient investments (such as stock market index funds) in taxable accounts is more beneficial as long as your overall portfolio asset allocation stays in line with your IPS. Learn more about how to invest tax efficiently by reading this piece from Fidelity Investments (link).

IPS starter checklist

Here's a Stacker quickstart guide:

Write your goals with numbers and dates (How to set S.M.A.R.T. money goals)
Assign a horizon to each goal (Using Time Horizons to Reach Your Investing Goals)
Choose an allocation that matches risk and horizon (Asset Allocation guide)
Decide your cash buckets and refill rules (The Bucket Approach to Retirement)
Pick goal-based benchmarks and decide how frequenly you'll review it (Goal-Based Investing: A Comprehensive Guide)
Set rebalancing rules and any decline triggers (Rebalancing your portfolio: How to rebalance)
Define roles so both partners know who does what (if applicable) (Tips for Investing as a Couple)
Store it and make a note in your calendar for the next review

Mom's takeaway

Write your plan on a calm day and put it where you can find it. When markets shout, follow your own directions and keep your hands off the panic button. If it is not written down, it is not a plan, it is a wish.

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Have a financial question?

Ask Joe and OG! If you're looking for expert advice, reach out to Joe and OG at 'Better Call Saul...Sehy & OG.' Simply visit THIS PAGE to leave us a voicemail.

Today's Top Financial Question:

An anonymous mom is teaching her 10-year-old about stocks. Her son asked, "What really happens to a share when you sell it?" Mom didn't know, so she passed the question on to us!

Our answer? Great question (and nice job, mom, for the financial education of your young Stacker!). Stock is tiny ownership of a company. When you sell that ownership, your portion simply moves from one owner to another as your sell "order" is electronically matched to a buyer in fractions of a second. No buyer? No problem? People called "market makers" step in to keep things orderly when buyers and sellers are out of balance.

That's why when you sell a stock there are different types of orders. A "market order" fills at the best available price now, a "stop" triggers a market order at your stop price, and a "limit" executes only at your stated price or better. When you sell at "the market," your order will float either up or down based on people who already may have specific buy orders at prices above or below your sale request. The price adjusts until someone agrees or you cancel.

During a sharply moving market, it's possible that your order will sell for far less than you intend if you sell "at the market." However, if you need the money, sometimes a specific sale price won't fill and you're left holding the stock.

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Show Off Your Stacker Pride

SB Swag →

Before you close this tab, write the first line of your IPS. One sentence is enough. When markets drop I will follow my plan, rebalance as scheduled, and keep buying. If it is not written, it is not real. Put it in your notes app, tape it to the fridge, or stash it with your account statements so Future You can find it fast.

Keep the momentum going. Grab the starter at stackingbenjamins.com/ips, draft your one pager, and send us your best line. On Wednesday we will keep building with a simple retirement plan you can plug your IPS into, so stay tuned and keep stacking.