9 Writing down a plan

Finally all these elements need to be written down in a plan that is clear and easy to understand with rules that we can follow consistently. The real time performance of the portfolio, along with the process of running it, need to be recorded and analyzed in detail. Through ongoing research and experiences, the plan will constantly evolve, while staying consistently true to its core principles. The golden middle would be to meddle as little as possible, but to be open to real improvements.

 

For my own investments I use a spreadsheet divided into three parts.

 

The portfolio
Here I list all open positions and closed trades divided by strategy. It includes current NAV (the value of all positions plus cash, if they were closed right then) and all the data points I need to run statistical analysis on each strategy. There is a comments section that serves as my investment diary, to record the circumstances, thoughts and emotions concerning each position.

 

The investment plan
On top I have a short description of each of the portfolio´s building blocks with each strategy´s rationale, properties, place and allocation range in the portfolio. It has a general diversification matrix of the strategies (with correlation and return distribution properties) and general tactical and position sizing rules that apply to the entire portfolio.
Below I list each strategy´s exact rules: entry and exit, stop loss, position sizes and limits, adaptive allocation rules and comments. I also write down the expected returns, volatility and drawdowns for each strategy.
I add general points to focus on and a list of relevant new ideas to research and adjustments I want to make when the market changes in certain ways.

 

Monthly results
Every month I calculate my profit or loss percentage as well as the portfolio NAV, including any withdrawals and deposits. These are plotted as a monthly return and equity curve.

 

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