2 pages from Benjamin Graham Intelligent investor (rough draft)

To protect yourself from emotional buying and selling, you need an ironclad Investment Policy Statement (IPS) combined with automated investing. Writing down your rules now—and automating your purchases—will remove the emotional decision-making when the market swings. [1, 2, 3, 4, 5]

Here are actionable ways to build long-term wealth and shield your portfolio from your emotions:

1. Write an "Investment Owner’s Contract"

Benjamin Graham, the father of value investing, famously suggested that investors write an Investment Owner's Contract. Draft a physical or digital document outlining exactly how long you will hold your investments (e.g., 5, 10, or 20 years) and what qualifies as an emergency exit (job loss, major medical expense). When you feel the urge to sell during a market panic or buy when things are soaring, read your contract to reaffirm your long-term intentions. [1, 2, 3, 4, 5]

2. Automate Your Purchases (Dollar-Cost Averaging)

The most effective way to avoid trying to "time the market" is to automate your contributions. By setting up recurring transfers from your checking account to your investment account, you practice Dollar-Cost Averaging. You will automatically buy fewer shares when prices are high and more shares when prices are low, removing the temptation to make impulsive trading decisions. [1, 2, 3, 4, 5]

3. Choose "Set-It-and-Forget-It" Investments

To avoid the temptation of tinkering with your portfolio or chasing the latest hot stock, opt for broadly diversified, low-cost funds that require no management on your part: [1, 2]

Benjamin Graham Intelligent Investor: 

Investment Owner's Contract (2 pages excerpt )

I, ------------------------------------, hereby state that I am an investor who is seeking to accumulate wealth for many years into the future. I know that there will be many times when I will be tempted to invest in stocks because they have gone up in price, and other times when I will be tempted to sell my investments because they have gone down.

I hereby declare my refusal to let a bunch of strangers make my financial decisions for me. I further make a solemn commitment never to invest because the stock market has gone up, and never to sell because it has gone down. Instead, I will invest $------.00 per month, every month, through an automatic investment plan or "dollar-cost averaging program," into the following mutual funds(s) or diversified portfolio(s).

I will also invest additional amounts whenever I can afford.

I hereby declare that I will hold each of these investments continually for through at least the following date (which must be a minimum of 10 years. The only exceptions allowed under the terms of this contract are a sudden, pressing, need for cash, like a health-care emergency or the loss of my job. I am, by signing below, stating my intention not only to abide by the terms of this contract, but to re-read this document whenever I am tempted to sell any of my investments. This contract is valid only when signed by at least one witness, and must be kept in a safe place that is easily accessible for future reference.

Signed: Date:
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Witnesses:
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