9 Writing down a plan

Virtually all successful investors and traders, I ever came across, have a written investment plan. To me a concrete plan is absolutely essential to even stand a chance, unless you opt for a set-up-and-forget-about-it solution, that is never touched.

Writing down your ideas and reflecting on the practical implementation over time makes progress possible – especially whenever mistakes occur.

All the elements in my blueprint (or wherever your plan comes from) are written down in a plan that is clear and easy to understand with rules that one 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 by analyzing live data, the plan will constantly evolve, while staying 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 the statistical analysis on each strategy. There is a comments section that serves as my investment diary, to record the circumstances, thoughts and reasons for the actions taken with each position.


The Investment Plan
At the 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 return, volatility and maximum drawdown for each strategy.
At the bottom 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 environment changes.

I also use an Evernote notebook with one page for each strategy for a quick overview of rules, current positions and actions to take and a trading checklist to go through before placing trades – this is meant to check impulsive behavior that leads to mistakes much too often.

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.

Research Notes
I use Evernote to keep track of interesting new ideas I come across, excerpts of books I read and the raw outlines of new strategies I intend to develop and backtest. I also keep a current To Do list for each strategy there. It is very practical for monitoring open positions and keeping a copy of strategy rules at hand for consultation when making decisions.

Step by step I will write about interesting aspects of investing and publish detailed rules for the strategies I use in my portfolio on this blog. I will also update my thoughts on the current allocation to different strategies and asset classes regularly, as well as describe some interesting, unforeseen events and mistakes that happen in practice.

I wish you Good Investing!

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