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Bob Powell: Do you go into a panic mode every time the stock market falls? Well, I'm here to tell you not to panic, or at least there's no need to panic provided you have a plan in place, an investment policy statement or what's called an IPS for short. If you don't have a plan in place, I don't want you to panic either. Instead, I want you to make a plan. I want you to create an investment policy statement. In essence, an IPS and investment policy statement is a blueprint for your investments. It spells out in writing what percent of your investment portfolio you should invest in stocks, bonds, and cash. It also spells out your time horizon, your investment goals, and your risk tolerance. But most importantly, it establishes when you will make adjustments to your portfolio. And those adjustments aren't dictated by emotion, but rather by reason. Let me give you an example. Let's say your IPS says you should invest 60% of your money in stocks and 40% in bonds, and that you won't make any changes unless there's a five percentage point change in your asset allocation. So in my example, if stocks were to represent more than say, 65% of your portfolio, you would sell just enough of your stocks to bring your asset allocation back to its target. Likewise, if stocks were to represent less than 55% of your portfolio, you would sell just enough of the overweight asset class, likely your bonds to bring the underweight asset class, your stocks in this example back to its target asset allocation of 60/ 40 that's pretty much it. So bottom line, don't panic if you have a plan and don't panic if you don't have a plan. Instead, make a plan, make an investment policy statement, and then stick to it. And you'll never worry about market declines, no matter how steep or frequent ever again. For more on this topic, check out TheStreet's retirement section and don't forget to subscribe to Retirement Daily.

Do you go into a panic mode every time the stock market falls?

If you have a plan - an investment policy statement -- there's no need to panic when the market declines in value. But if you don't have a plan there's no need to panic either. Instead, your best bet is to make a plan - to draft an investment policy statement or IPS.

An IPS is a document that details how what percent of your portfolio you'll invest in stocks, bonds and cash. The IPS also specifies your time horizon, investment objective, and risk tolerance. But most importantly, the IPS establishes when you will sell and when you buy. And it's based on rules not on emotion. In essence, you'll never worry about market declines - no matter how steep or frequent -- again.

Two good resources to learn more about investment policy statements are the CFA Institute's Elements of an Investment Policy Statement for Individual Investors https://www.cfainstitute.org/-/.../investment-policy-statement-individual-inv... and Morningstar's Creating Your Investment Policy Statement https://news.morningstar.com/classroom2/course.asp?docId=4439...1

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