Portfolio management is an important part of your life. Maybe more important than you realize. You have an overall portfolio that is made up of everything you own. Within that portfolio is your investment assets that you need to manage in order to reach your financial goals and have a healthy and wealthy egg-nest to enjoy in your golden retirement years.

In order to profit from portfolio management, it is important to start by designing an investment policy statement and keep to it during the course of investing. An investment policy is your guideline… it's a rule of thumb meant to help you or your portfolio manager make the best decisions for you. Sometimes (actually, often!) our emotions cloud our judgment when it comes to investing.

A fairly significant time when emotion clouds our judgment is when our portfolio value is falling. Our knee-jerk reaction is to sell it all and put the money in a hole in the backyard. That happens far too often and was one of the major causes of the Great Depression in 1939 and the bursting of the tech bubble in 2000/2001. Investors are so easily swayed by emotion and what's called "the herd mentality."

An investment policy is designed to help you avoid emotional investing or getting caught up in the herd mentality. It's a statement – as detailed or as vague as you want – that outlines what your goals are with your portfolio, what your preferred asset mix is, and the timeline you have to get there.

Here is a sample investment policy statement. Due to space limitations, it is not heavily detailed.

Investment Policy Statement for John Doe

March 14, 2006

Purpose: the purpose of this statement is to provide me with a framework in which to manage my investment portfolio.

1. Account: My account is held at XYZ Discount Brokers. Their number is (800)555-1234. My account number is 123-456-789-123.

2. Investment objectives: My primary goal is growth and the mix I have selected is as follows: a.Growth: 55% b.Income: 25% c.Safety: 20%

3. Assets: My account is a standard account to hold equities, bonds, mutual funds, etc.

4. Current: I am investing a lump sum of $5000 into an equities and mutual fund mix that correlates to the above asset allocation. Each month I will deposit $200 into my account, divided into each of the asset allocations.

5. Goals: I want to have $100,000 within 25 years to enable me to buy a boat and sail around the world.

On this note, I hope that everybody who desires to generate massive profit from portfolio management, to take out a piece of paper and build your investment policy now. And remember to live with it, and I am sure you will find yourself much more rational in your investment decisions !