Purpose
Rules written before the moment of temptation
This Investment Policy Statement establishes the objectives, position-sizing constraints, and accountability standards governing the AEA Capital Research portfolio. Every position is measured against the limits below, and each monthly review reports where I actually stand versus them.
“The purpose of a policy is not to look disciplined. It is to be disciplined on the day the market makes discipline expensive.”
1 & 2 — Objective, Horizon & Benchmark
Long-term growth, measured against SPY
Long-term capital growth over a multi-year horizon. This is capital I don’t need near-term, so I can absorb short-term price swings in exchange for compounding. That tradeoff is also an age-and-overhead decision, not just a temperament one: I’m early in my investing life, with no dependents and no near-term liquidity the account has to fund — exactly the setup where leaning toward high-conviction growth compounders makes more sense than a heavier allocation to bonds or fixed income. A portfolio that has to fund an obligation in five years should be built more conservatively than this one is. I am not trading for income and I am not trying to time the market.
Benchmark: SPY. Performance is measured time-weighted, with deposits stripped out. If I can’t beat a low-cost index over time, the right move is to own more of the index — and to say so plainly.
3
Portfolio structure & position limits
Five buckets, each with its own ceiling. Bucket assignment for every current holding is visible on the Holdings table and the Coverage Book.
Core / Quality Compounders
Profitable or clear path-to-profit large & mid caps. Limit: majority of the book.
Emerging Growth
Smaller operating companies with real revenue. Limit: flexible.
Speculative Sleeve
Micro-caps, story stocks, pre-profit names. Limit: ≤25% of invested capital.
Leveraged / Derivative
Leveraged & thematic ETFs, daily-reset. Limit: ≤5% of invested capital.
Index Hedge
Broad-market ETFs (e.g. VOO, SPY). Ballast, always held.
- Single-position cap: ≤10% at cost.
- Leverage caution: daily-reset leveraged instruments are excluded from long-term holding consideration due to volatility decay; any leveraged position is aggregated with its underlying for single-name concentration purposes.
- Diversification: spread across sectors, and flag single-theme clustering when it appears.
4
How an idea becomes a position
- Written thesis — what must be true for this to work, and which operating assumptions carry the decision.
- Risk case — what breaks it, the competing view, and my honest odds of being wrong.
- Sizing — which bucket it belongs in, and how much.
- Catalyst & review date — what I’m waiting for, and when I’ll re-check.
In practice, every position page carries this as a three-field Investment Thesis: the Catalyst (why now), the Fundamental Case (an objective read of the business), and the Risk Factor (a frank downside assessment). It’s the same discipline as above, just in a format short enough to actually re-read before adding to a position.
5
Sell discipline
- Thesis breaks → exit.
- Position drifts beyond its bucket or cap → trim back to policy.
- Sell to fund a clearly stronger idea.
- Never average down on a broken thesis just to lower the cost basis.
Trading Compliance & Ethics
Two rules about timing, not sizing
Effective July 11, 2026, governing trade timing rather than position sizing. Both are now tracked on the Compliance Ledger alongside the caps above.
The Blackout Rule
No trades — buys or sells — are executed in a position within 48 hours prior to that company’s scheduled earnings release.
Rationale: trading immediately ahead of a known catalyst is a bet on the print, not on the thesis. This rule forces every trade to be justified by the standing thesis, not by trying to time an information event.
The Holding Period
Core-bucket positions are subject to a minimum 30-day holding period from the date of purchase, absent a thesis-breaking event.
Rationale: the Core bucket exists for durable, quality compounders — a minimum holding period is a structural check against reacting to short-term price noise in positions meant to be held on a multi-year view.
6
Accountability
- Monthly performance vs. SPY, published.
- Speculative and leveraged sleeve weights disclosed against their caps.
- Rule breaks reported, with the reason why.
- Holdings Blossom-verified; the policy itself reviewed quarterly and updated openly.
Every cap above is checked against the live portfolio on the Compliance Ledger — a running scoreboard, not a one-time claim.
Not Policy, But Part Of Why It Exists
Quotes I keep coming back to
These are the lines I actually think about when a position is down double digits or the whole book is red on a day the index isn’t.
“Be fearful when others are greedy, and greedy when others are fearful.”
— Warren Buffett
This is the one I reread every time a position sells off on sentiment rather than fundamentals — the July 7 chip selloff being the most recent example. It’s easy to nod along to this quote in the abstract and much harder to actually act on it when the position that’s down is your own money.
“In the short run, the market is a voting machine. In the long run, it is a weighing machine.”
— Benjamin Graham
This is the quote behind the distinction the Disclosures page insists on between the home page’s illustrative, indexed-to-100 chart and the account’s real, dollar-weighted all-time return.
“The big money is not in the buying and the selling, but in the waiting.”
— Charlie Munger
The single hardest rule in this entire policy to actually follow. Every letter that says “no position changes from this” after a rough week is this quote in practice.
“Know what you own, and know why you own it.”
— Peter Lynch
This is the entire reason every position on this site carries a written Catalyst / Fundamental Case / Risk Factor thesis instead of just a ticker and a return number.
“Don’t look for the needle in the haystack. Just buy the haystack.”
— John Bogle
The reasoning behind the Index Hedge bucket — SPY, VOO, QQQ, and SCHD are held always, not because I don’t believe in stock-picking but because Bogle’s underlying point is honest: most of the time, most people (including me) don’t beat the index, and pretending otherwise is expensive. The About page’s “beat the index or own the index” line is a direct descendant of this quote.
7
Revision history
This document is reviewed quarterly and updated openly — changes are logged here rather than silently edited in.
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2022 · v1
Initial policy written
Five-bucket structure, single-position cap, sell discipline set before the first position was opened. See the Founding Note for the reasoning.
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Jul 2026 · v2
Formalized the Investment Thesis template
Three fields (Catalyst / Fundamental Case / Risk Factor) added under Section 4. Dropped the policy of withholding dollar balances in favor of full transparency across the site.
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Jul 2026 · v3
Added the Quotes section
A non-normative “Quotes I keep coming back to” section added after Section 6 — personal, not policy, but part of the reasoning behind it.