There are a number of issues that need to be carefully considered to craft investment policies.  These include the scope of the project—ambitions and limitations—and the overall constraints you need to keep in mind.

Defining Investment policy success, and managing toward it, and thinking about how you think about it…

• Carefully examine what you think you know.  Are you basing certain investment policies on assumptions about how the world (or certain investment types) behave?  What is the basis for those assumptions, how valid is the basis, and what are the implications of being mistaken?   Sometimes it helps to take a step back and make sure that you are thinking it through completely. 
• No matter how well you construct the policies, there are circumstances you will not be able to foresee.  The policy creation process involves trying envision the categories of circumstances and creating general themes of response, rather than necessarily predicting the specific outcomes.  You may project possible scenarios and expected results but you need to accept that the results of the scenario may not be what you anticipate.
• The future is entirely opaque.  Various projection mechanisms exist, but all are purely hypothetical and use assumptions that you need to understand.
• If might be a good idea to find a way to hypothesize  “worst-case scenarios” even though actually quantifying the circumstances of this case might be impossible.  The policies should countenance success as exceeding the worst-case scenario, and be subject to regular review and revision as circumstances become more clear.
• Many publicly available tools for asset allocation and portfolio construction use some particular statistical methodology for determining the portfolio weightings.  It is important to understand what assumptions are made by this program, and what it is really projecting.  These tools might use recent history to project forward, and if so, this could create a hindsight bias.
• It is important to think in advance about what your basic policy model is.  Given that you can never know what the world will present as investment circumstances, you will trying to categorize your responses by types of events.  For example, in the event of a stock market downturn,  what are your plans, would you buy, sell or hold?  What if it worsens?  Continues?  Worsens further?  If this is your policy bias, how committed are you to it?  What is your bias based upon?   How valid is that basis?

If you still need help, feel free to contact us, or get started by downloading our whitepaper.