You have now covered how markets work, two complete analytical disciplines, and the behavioural failures that undo both. This lesson turns that into a single document — because knowledge you have not converted into a rule will not survive contact with a falling market.
The nine sections
- 11. What this money is for
Each goal, its amount and its date. Retirement in 2050, a house deposit in 2029. This determines everything downstream, and it is the section people skip.
- 22. Asset allocation, with a band
"70% equity, 25% debt, 5% cash, rebalanced if any drifts more than 10 points." A number, not a feeling.
- 33. Your circle of competence
Which sectors and business models you will actually analyse — and, more usefully, which you will not touch. "No companies whose accounting I cannot follow" is a legitimate and valuable rule.
- 44. How you select
Your screen, and the checks that follow it. Quality thresholds, red-flag checklist, and the requirement to write a thesis before buying.
- 55. Position sizing
Maximum position size, maximum sector exposure, risk per trade if you trade. Derived by formula, never from conviction.
- 66. Sell rules
The conditions that make you exit — thesis broken, substantially overvalued, better idea, position outgrew tolerance. Written before you own anything.
- 77. What you will not do
Often the most valuable section. No leverage. No F&O. No stocks below a liquidity threshold. No acting on tips. No buying within 24 hours of first hearing about something.
- 88. Review cadence
When you look, what you check, and when you are allowed to change the document. Weekly portfolio check, quarterly results review, annual rebalance and policy review.
- 99. Your crash plan
Exactly what you do at index falls of 20%, 30% and 40%. Pre-committed tranches of cash, written down, so that nothing has to be decided in the moment.
The circle of competence, honestly drawn
The boundary matters far more than the size. It is entirely respectable to say "I understand consumer businesses and IT services; I do not understand banks, and I will not own them individually." What is not respectable is having no boundary and therefore owning whatever was recently discussed.
Rules that survive stress
- “Maximum 8% in any one stock, 25% in any one sector.”
- “I check the portfolio on Sunday and at no other time.”
- “I wait 24 hours between wanting to buy and buying.”
- “I write a thesis with a disproof condition before every purchase.”
- “I will be disciplined.”
- “I will not panic.”
- “I will do more research.”
- “I will cut losses quickly.”
The difference is that the left column is checkable. A rule you cannot verify compliance with is an intention, and intentions do not survive a 30% drawdown.
What to expect, realistically
The first version
Write it today, badly, in one page. A rough document you follow beats a perfect one you never finish. Revisit it once a year — deliberately, on a date, with the market closed — and change it because you learned something, never because something recently went up or down.
The capstone check
3 questions. Answers are revealed once you submit all of them.
1.Why must the crash plan specify actions at defined index levels rather than "buy when it looks like the bottom"?
2.What makes "I will cut losses quickly" a poor rule?
3.Why is the "what I will not do" section often the most valuable?
Doosre ka joota kitna bhi mehnga ho, aapke pair mein na aaye toh chal nahi paoge. Kisi bade investor ki strategy bhi waisi hi hai. Aapki naukri, fursat, aur himmat alag hai — process usi ke naap ka banao, warna theek 3 mahine baad chhod doge.
- Write the policy statement while calm; its job is to govern the version of you who is not.
- Nine sections — goals, allocation, circle of competence, selection, sizing, sell rules, prohibitions, review, crash plan.
- A rule must be checkable. "I will be disciplined" is an intention, not a rule.
- The "what I will not do" section prevents the losses that actually matter.
- A process is not a promise of outperformance — it is a guarantee that your decisions, not your emotions, drive the outcome.
Mark it done to track your progress through the curriculum.
Common questions
Short, direct answers to what people ask about this topic.
- how do i write down my own investing rules
- An investment policy statement is a single written document setting out what your money is for, how it is allocated, how you select and size positions, when you sell, what you will not do, when you review, and what you will do in a crash. It is written while you are calm, and its entire purpose is to govern the version of you who is not. Everything in it should be specific enough that a stranger could read it and know exactly what you would do in a given situation.
- the set of businesses an investor understands well enough to analyse is called their
- Circle of competence. The boundary matters far more than the size — saying “I understand consumer businesses and IT services, and I will not own banks individually” is a perfectly respectable position, while having no boundary and therefore owning whatever was recently discussed is not. A workable test is whether you could explain to someone who knows nothing about it how the company makes money, who its customers are, what could kill it, and why it earns the returns it does.
- how do I write an investment policy statement for the first time
- Write the first version today, badly, in one page — a rough document you actually follow beats a perfect one you never finish. The nine sections, in order, are goals with amounts and dates, asset allocation with a rebalancing band, your circle of competence, how you select, position sizing, sell rules, what you will not do, your review cadence, and your crash plan. Revisit it once a year on a fixed date with the market closed, and change it because you learned something rather than because something recently went up or down.
- what makes a good investing rule
- It has to be checkable — you must be able to audit yourself against it afterwards. “Maximum 8% in any one stock, 25% in any one sector” and “I wait 24 hours between wanting to buy and buying” are rules; “I will be disciplined” and “I will cut losses quickly” are intentions, and intentions do not survive a 30% drawdown because there is no moment at which you have clearly broken them. The same idea made verifiable — an exit level placed at the same time as the entry — is a rule again.
- what is a crash plan in investing
- A crash plan is the section of a written policy that states exactly what you will do at index falls of 20%, 30% and 40% — usually pre-committed tranches of cash deployed at each level, decided in advance so that nothing has to be judged in the moment. It is written that way because nobody identifies the bottom in real time, and a rule requiring judgement will be applied precisely when your judgement is worst. “Buy when it looks like the bottom” reliably means deploying only after the recovery is obvious and prices have already risen.