My plan called for LSD on Saturdays.  No, I don't mean that kind of LSD.  In the vocabulary of endurance runners, LSD means Long Slow Distance.  But even my LSD runs had a specific pace goal that I was to follow if I was going to get my training to a level that would make it possible to accomplish my goal of a personal record in the Columbus Marathon.

Hillwork was part of the plan for Mondays.  Easy runs on Tuesdays and Wednesdays, speedwork on Thursdays, and much needed rest on Fridays and Sundays.  It was a very specific training plan.  It wasn't easy, but I knew if I stuck to my plan, I would have a good chance of reaching my goal.

The same principal applies to investing.  In running, we call it a training plan.  In investing, we call it an Investment Policy Statement (IPS).  A good IPS will provide you with guidelines on how your portfolio should be managed.  When done properly, it should take into consideration:

• Your current circumstances
• Your goals
• Your risk tolerance
• Your time horizon
• Any tax issues that should be considered
• Cash flow or liquidity needs
• A target rate of return
• Any constraints or other concerns you may have about a specific security or asset class

You can think of an IPS as a roadmap, or even a GPS, for your portfolio.  Much like a training plan for a marathon will keep you on track to reach your goal; an IPS can help you stay on the right path with your investments.  It will help you determine the appropriate asset allocation for your portfolio.  For example, an older investor with current cash flow needs from the portfolio should select an asset allocation with a more conservative mix.  A younger investor who is working on accumulating funds in a company retirement plan could select a more aggressive mix.

So, when is the last time you reviewed your IPS?  What's that?  You don't have an IPS?  Unfortunately, you are not alone.  Most individual investors don't have this important document.  Investing without in investment policy statement is like running a marathon without a training plan.  You may get to the finish line, but you would have a much more successful, less stressful and less painful experience with a good plan in place.

With my investment management clients, the investment policy statement is the document that spells out exactly how we will manage the portfolio.  It gives the client a way to express expectations, and it gives me a specific framework in which to operate.

I just met with a very successful running coach.  His most important piece of advice was that every run should have a purpose.  When investing, every asset you own should have a purpose.  Just like runners sometimes log junk miles, investors too often have junk positions in their portfolio.  A good training plan, or investment policy statement, can help you avoid the junk.

My training plan for Columbus wasn't easy, and there were days when I didn't feel like sticking with the plan.  And with the markets they way they have been, there have been a lot of times in the last 18-24 months that it hasn't been easy to stick to an investment policy statement. That leads to another similarity between running and investing…the need for discipline.  That's next week's topic.  Until then, remember…life is not a sprint, it's a marathon!