Personal Finance



Fin200 Investment Plan Template (LT5D)Finance 2002019I. Introduction and Purpose:A. Introduction: Who is this Plan for?Name and ageB. Purpose: What is the purpose of this plan?The purpose is to _(describe in detail how the Plan’s assets are to be determined, managed and evaluated to accomplish the Team’s vision and goals)_. (recommended)C. Principles: What are the principles you will follow?This Plan follows a principles-based approach. Principles followed in the development and implementation of this Investment Plan include _(know yourself, your vision and goals; seek, receive and act on the Spirit’s guidance; understand risk; stay diversified; invest low-cost and tax efficiently; invest long-term; know what you invest in, monitoring portfolio performance; do not waste too much energy trying to beat the market; work with high-quality individuals and institutions; and develop a good Investment Plan and follow it)_ (recommended)II. Investment Goals and Objectives:A. Objectives. What are your investment objectives for your assets?The objective of this Investment Plan is to help the Team _(understand their vision, set goals, develop plans and strategies to accomplish that vision and goals, understand constraints, and share accountability with others as necessary )_ (recommended)B. Investment Vehicles. What investment vehicles (shopping carts) will you use?The Team will use _(multiple investment vehicles (sub-accounts) to accomplish that vision including taxable accounts, including bank, brokerage and mutual funds accounts; retirement accounts, including 401ks/Roth 401ks, IRA/Roth IRAs, SEP IRA/SIMPLE Plans; education accounts, including Education IRAs, 529 Savings Plans, US Savings bonds; and mission accounts, including mutual, bank, brokerage, and custodial accounts)_. Retirement, mission and education accounts and goals are discussed in the vision and goals, retirement and family sections of the Team’s PFP. C. Time Frames. What are the time-frames or stages for your investments?Assets will be managed differently depending on your time frame or stages.Stage 1 is from now until age _(65)_ and is the period before retirement. Stage 2 is from age _(65)_ until we die and is the period during retirement.D. Expected Returns These are our portfolio expected returns for the following stages: 1. Stage 1. What is your expected return before retirement?The portfolio expected return before retirement is _(6.5%)_ (recommended 7% or less) 2. Stage 2. What is your expected return during retirement?The portfolio expected return during retirement is _(5.5%)_ (recommended 6% or less)E. Expected Risk. What type of investor (from LT16) are you?We are _(very conservative, conservative, moderate, aggressive, very aggressive)_ investors 1. Stage 1. What is your expected risk before retirement?Risk before retirement will be consistent with the risk of our diversified portfolio before retirement (recommended) 2. Stage 2. What is your expected risk during retirement?Risk during retirement will be consistent with the risk of our diversified portfolio during retirement (recommended) III. Investment Guidelines and Constraints: A. Guidelines. We have established these guidelines. 1. Stage 1. What are your investment guidelines before retirement?Before retirement, management of accounts will be for _(capital appreciation and the growth of assets)_. The majority of assets invested during this stage will be long-term assets, and will not be needed for many years. Exceptions to this are the likely purchase of a home in _(3 years)_ or when the children leave for college or missions, which is likely to begin in year _(2030)_ 2. Stage 2. What are your investment guidelines after retirement?During retirement, management of accounts will be mainly for _(income generation and capital preservation)_ with a secondary goal of _(building assets)_ that will allow the Investment Team to _(_enjoy retirement_, _go on missions_, _prepare for increased health costs_, _pass on to their heirs assets consistent with the Investment Team’s long-term goals and values_)_. Major funding needs during this Stage are likely to be for _(_missions_, _financial aid for grandkid’s missions and education_, _funding for travel_, _other reasons_)_ (recommended)B. Constraints. What are your investing constraints? 1. Liquidity. When will you need this money?We will need most of this money in _(30 years)_ for _(retirement)_ 2. Time Horizon. How long will this money be invested?This money will be invested with a _(30)_ year time horizon 3. Taxes. What are your current marginal and average tax ratesOur marginal Federal tax rate is _(12%)_, our State tax rate is _(5%)_, and average tax rate is _(5%)_. 4. Unique Needs. Do you have any specific family needs?We have the following unique needs:IV. Investment Policies, Plans and Strategies:A. Acceptable Investments.The following asset classes and investments are acceptable 1. Acceptable Asset Classes. What asset classes will you invest in? We will invest in the following asset classes: a. Bonds/cash. How will you gain exposure to bonds and cash?The portfolios will contain bond funds including _(corporate bonds, Treasury bonds, and municipal bonds)_, particularly as the Team’s tax bracket rises. The Team will also likely invest in cash funds as well. Cash will usually mean _(money market funds, short-term commercial paper, and other short-term debt instruments)_ (recommended). b. Stocks. How will you gain exposure to stocks? The portfolios will include stock funds including _(_US stocks, ADRs, international and emerging market stocks)_. These stock funds will be managed in a diversified manner, spread across countries, industries and companies (recommended) c. Other Assets. How will you gain exposure to other asset classes? Portfolios may also include other assets, which would typically mean _(Real Estate Investment Trusts (REITS), gold funds)_, which, in an asset class sense, are not viewed as "stocks" because of their unique nature (recommended) 2. Unacceptable Asset Classes. What asset classes will you not invest in?The Team will not invest in asset classes or assets where the Team has no discernable specific advantage, i.e. derivatives, collectibles, foreign currencies, options and futures (recommended) 3. Debt. Will you use debt to invest? We will not sell short or buy on margin. We will not use debt to invest (recommended) B. Benchmarks. What are your preferred investment benchmarks?Bonds/Cash (Emergency Fund) – Barclay’s Aggregate Bond IndexLarge Cap – S&P 500 Index Small Cap – Russell 2000 IndexInternational – MSCI EAFE IndexREITs – Dow Jones REIT IndexEmerging Markets – MSCI Emerging Markets Free (above are recommended benchmarks)C. Asset Allocation. What is your asset allocation?Following in our asset allocation or risk for each of the Stages: 1. Stage 1. What is your asset allocation strategy before retirement?Taxable Retirement Asset Class ___% Bonds/Cash (Emergency Fund) ___% ___% Large Cap ___% ___% Small Cap ___% ___% International ___% ___% Emerging Markets ___% ___% REITs 2. Stage 2. What is your asset allocation strategy during retirement?Taxable Retirement Asset Class ___% Bonds/Cash (Emergency Fund) ___% ___% Large Cap ___% ___% Small Cap ___% ___% International ___% ___% Emerging Markets ___% ___% REITsD. Investment Strategy. How will you choose to invest?The Team follows a generally passive approach to investing. In the selection of investment vehicles, they follow the priority of money including “free money,” “tax-advantaged money,” and “tax efficient and wise investing.” The Team uses a principles based approach to invest (recommended) 1. Active versus Passive. Will you invest actively, passively or both?The Team will invest both through passive and active, but mainly passive as it is easier, more tax efficient, and generally performs better (recommended) 2. Individual Assets. At what portfolio size will you buy individual assets?The Team may think about buying individual assets when their assets exceed ___($750,000 recommended or never) 3. New Investments. What about new investments? a. New Investments. What is your maximum % any new investment? The Team will have a maximum of _(7.5%)_ in any new investment, except mutual/index/ETFs (recommended) b. Company Stock. What is your maximum % in your company stock?The Team will have a maximum of _(10%)_ in company stock in my portfolio (10% recommended) c. Unlisted/Unregistered Investments. What is your maximum you’re your unregistered/unlisted investments?The Team will not invest in any unregistered or unlisted investment (recommended) d. Will you use debt to invest?The Team will not borrow on margin (use debt), sell short (borrow shares), or use debt to invest (recommended) 4. Current Investment Strategy. What is your current investment strategy? 5. Tax Strategy. What is your balance between taxable, tax-deferred and tax-eliminated accounts?The Team’s current investment strategy is found in the Investment Process worksheet, (LT13) which includes asset classes, percentages before retirement, benchmarks, and financial assetsThe team will shoot for a balance among taxable (_30%_), tax-deferred (_30%_), and tax-eliminated (_40%_) accounts so that they can target their tax rates in retirementE. Funding. How will you fund your investments?The Team will fund the investments with a (_20%_) allocation each month, with _(15%)_ going into retirement vehicles (recommended)V. Investment Monitoring, Rebalancing and Accountability:A. Monitoring. How you will monitor your portfolioThe Team will monitor the portfolio _(weekly, monthly, quarterly)_ (monthly recommended) 1. Portfolio Monitoring Method. What method will you use to monitor portfolio performance?The Team will use an electronic system, such as Quicken or Mint (recommended) to monitor the portfoliosB. Rebalancing. How often you will rebalance your portfolio?The Team will rebalance the portfolio annually, or whenever the ranges are +/- _(5%)_(5-10% recommended). 1. Portfolio Rebalancing Method. What rebalancing method will you use to rebalance your portfolio? The Team will rebalance using the New Money/Donations addendum. This has the least impact on taxes and is very tax efficient (recommended)C. Accountability. How you will communicate results to your Team/spouse?The Team will communicate results monthly (recommended) 1. Portfolio Accountability Method. How you will communicate portfolio results? The Team will communicate results using the reports generated in Quicken (or other software program) (recommended)D. Plan Revisions. What is required for you to change this Investment Plan?The Team will review this Plan annually and make changes as necessary (recommended)E. Team Signatures. Who will be following this Plan?Signed:Signed:VI. ExhibitsExhibit 1. Expected Return Simulation and Benchmarks (LT27)). Include your asset classes and asset allocation targets for both before and during retirement. Note your expected return will likely be less than what it shows in this spreadsheet.Exhibit 2. Investment Process Worksheet (LT13). Include your asset classes, benchmarks, and Mutual Fund names in this spreadsheet.Exhibit 3. Financial Asset Pages from Morningstar for each of your chosen mutual funds/index funds/ETFs. ................
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