The Investment Policy Statement and Keeping your Sanity

Many years ago when I started investing, I thought the best way to do so was with single stocks. I won sometimes, but mostly lost. Eventually, I came across a group of people called “Bogleheads" and I learned a lot about investing. They supported only investing in a small number of ETFs, holding, and maybe most important of all, coming up with your own ‘individual policy statement’(IPS).

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I think this IPS is an essential tool for crypto investors also. It’s introspective and it takes much of the subjectiveness out of your investments. Without an IPS, we tend to base decisions on whims of the day to day events and that’s problematic for long term goals. Then you read that IPS often. When you're FOMO'ing or sweating about drops, you read that thing again. 

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How my current IPS for my crypto holdings looks:

Investment Objectives. 

1. Objective 1: Utilize crypto to allow me to retire 7-10 years earlier
2. Objective 2: Annual income from investments of $50,000 year after retirement
3. Objective 3: Minimize tax liabilities
4. Objective 4: Re-evaluate holding limits yearly, and consider revisions based on personal situations

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Risk Tolerance

I understand the risk associated with crypto. The volatility in a day to day, or even month to month may significantly change my holding limits. As such, I will keep crypto to only 5-10% of my investment portfolio

Holding Limits

1. Minimums and Maximums. If these move beyond these limits, begin thinking about a rebalance
2. Bitcoin 30-40%
3. Ethereum 30-40%
4. Interest Bearing Crypto Investments (BlockFi) 10-20%
5. Altcoins 0-10%
6. Cash 0-20%

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Target Allocation

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1. Bitcoin 35%
2. Ethereum 35%
3. Interest Bearing Crypto Investments (BlockFi) 15%
4. Altcoins 5%
5. Cash 10%

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Review Process

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Holdings will be monitored quarterly, and rebalanced annually. Adjustments should be minimal, as this is a long term holding strategy

Rebalancing

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In order to minimize fees and taxes for converting currencies, rebalancing should occur on a yearly basis, and currency conversions should be limited as much as possible. Rebalancing with Fiat is optimal to rebalancing with conversions

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Figure out a plan. Ask yourself why you're putting your money into a currency and what your expectations are. Share your plan and have others question your choices. The more you can answer these questions, the more confident you become, the stronger your IPS becomes, and the more sleep you get.