What are plans and rules?
An investment plan is a short document you write for yourself: why you are investing, for how long, how much each month, how much goes where, and how much risk you are willing to take. Rules are the small habits that keep you to that plan, such as “no more than 10% of my money in any one share” or “I won’t buy anything the same day I hear a tip”.
The idea is simple: decisions are made in calm times and followed in turbulent ones. On the day of a crash, or when everyone is excited about some share, instead of thinking afresh you just look at the rule you wrote.
Say Rafi invests a fixed amount as soon as his salary arrives each month, and he has a written rule: “No panic selling when prices fall; I review the whole portfolio twice a year.” One day news reaches his office group that the market has fallen sharply in a week, and everyone says “sell everything”. Rafi feels the panic, but he opens his notebook, sees his goal is ten years away, and his rule says nothing needs doing now. He invests that month as usual. This is an imaginary example.
Why it matters to an investor
- To cut emotional mistakes: selling in fear and buying in greed both tend to happen on impulse. A written rule puts a pause in between.
- To avoid the cost of bad timing: research shows investors often buy after prices have risen and sell after they have fallen, so they earn less than the funds they hold.
- To stay within your own risk limits: when it is decided in advance, the temptation to pour everything into one share or one “opportunity” is weaker.
- To check your decisions later: with a written plan you can tell whether a mistake was in the plan or in not following it.
What a simple plan contains
In the professional world this document is called an investment policy statement (IPS). CFA Institute has published a guide to its elements for individual investors, covering writing down your objectives, return expectations, risk management and who decides what. For an ordinary person, one page is enough.
- Goal and time: what the money is for (a child’s education, a home, retirement) and how many years until you need it.
- Amounts: how much each month, and on which date. Whether a separate emergency fund is in place.
- What goes where: roughly what split between shares, funds, savings certificates, FDRs and so on, and why.
- When to review and when to change: say once or twice a year, or after a big life change (a new job, marriage, a child).
What a good rule looks like
A good rule is specific and measurable. “I won’t take too much risk” is vague; “no more than 10% of my money in any one company” is clear. Write the reason next to the rule in one line, because under pressure, if you forget why, you will want to break it. Set the numbers to suit your own situation; the ones here are only examples.
- A waiting rule: “After any tip or news, I will wait at least a week and read up myself.”
- A limit rule: “I won’t buy shares with borrowed money or my emergency fund.”
- A regularity rule: “I will invest on a fixed date every month, whatever the market is doing.”
- A rule for changing rules: “I will change a rule only on my planned review day, never on a day of market excitement.”
What the research says
Morningstar’s “Mind the Gap 2026” study found that over the ten years to the end of 2025, US mutual funds and ETFs returned about 9.9% a year on average, but investors’ money in them earned about 8.7% a year. A big reason for this gap of about 1.2 percentage points is timing: getting in after prices rise and getting out after they fall. This is data from another country, but human behaviour is much the same everywhere.
Source: Morningstar, “Mind the Gap 2026”
See the numbers as a table
| Return a year | |
|---|---|
| The funds | 9.9% |
| Investors’ money in them | 8.7% |
Worked example
- Say Mitu’s whole portfolio is Tk 2,00,000. Her rule: no more than 10% in any one share, so at most Tk 20,000.
- A friend is very excited about a share. Mitu feels like putting Tk 80,000 into it. Her rule says Tk 20,000 at most.
- Later the share’s price halves. On Tk 20,000 the loss is Tk 10,000, or 5% of the portfolio. Had she put in Tk 80,000, the loss would have been Tk 40,000, or 20%.
Result: a rule doesn’t predict the future; the share could have risen. But it caps in advance how much a mistake can cost. The numbers are only an example.
Common mistakes
- Keeping the plan in your head rather than on paper. Under pressure, a plan in your head changes easily.
- Breaking a rule because “this time is different”. It feels that way in almost every moment of excitement.
- Making rules so strict or so many that they can’t be followed. A few clear rules work better.
- Changing the plan with every market move. The place to change a plan is a scheduled review, not the daily news.
Decide in calm times, simply follow in turbulent ones: a one-page written plan and a few clear rules can protect you from emotional mistakes.