What the policy should include.
- Goals and time horizon.
- Target allocation and allowed drift bands.
- Contribution, withdrawal, and cash rules.
- Tax-aware rebalancing process.
- Review calendar and change triggers.
Write rules before volatility arrives.
Rules help investors avoid improvising. For example: rebalance when a major allocation drifts more than 5 percentage points, review quarterly, and use new contributions before selling in taxable accounts.
A policy is not useful if it is vague.
"Invest for the long term" is a slogan, not a rule. Useful policies define numbers, dates, conditions, and exceptions.