It’s easy to be buffeted about in the high seas of investing — strong winds from the latest hot stocks, the inevitable swells of the market, the stormy waters of a correction. One way to stay on course and not panic during these rough seas, and not to get too carried away during smoother sailing, is to chart a course with an investment policy statement.

An investment policy statement is a written document that defines your investment goals, what strategies to use to achieve those goals, and how to adjust for changes. Written policy statements are de rigueur for professional money managers of pension funds, mutual funds and home offices.

But individual investors rarely write a formal plan. Here’s what should go into one. Investment objectives. What do you want your investments to achieve? This can only be answered in the context of defining your overall financial goals, such as retiring at a certain age at a certain level of income, building a college fund or buying a business.

The plan should state objectives in light of these goals. For example, do you want the portfolio to provide high current income for retirement, long-term growth for future retirement, to provide for your heirs or a balance of the two?

Define length of the portfolio. Unlike a pension fund or mutual fund, which typically are designed to go on forever, your portfolio will have a defined life — typically your life expectancy, but perhaps shorter. How much time you have is important to what assets and investment strategies you use for the portfolio.

Establish investment return goals. What minimum rate of return, above the inflation rate, do you want the investments to provide? This is clearly tied to the objectives. If you want to retire with $500,000, $2 million or $50 million in your nest egg, what kind of return will you need to make based on your current and projected investment assets?

Be realistic about projected returns. Sure, the stock market has been returning double digits for the last several years (but not the bond market). However, assuming a 20 percent return for the next 15 to 20 years is an unrealistic assumption, say most investment advisors.

Risk tolerance. How much risk are you willing to take to achieve those investment returns? The higher the desired return, generally the higher the risk you must take. Are you willing to accept losses within certain categories as long as the overall portfolio does not lose principal over a 12-month period? Would you accept an overall portfolio loss of five or ten percent for two years running, but not three? Write your stipulations into the policy statement.

Your risk tolerance may prove to be out of sync with your investment return objectives. You may need to adjust either your anticipated returns because youill need to be more conservative in your investments, or you will have to stomach higher risk, which isnit a good idea if it leaves you edgy. That’s when panic decisions are made.

Establish an investment mix. What classes of assets do you want to put into your portfolio that will give you the return you want, and what classes do you want to keep out? Stocks, bonds, cash and real estate investments trusts (REITs), but not junk bonds, gold or limited partnerships? How much, if any, foreign exposure? What portion of the portfolio will you allocate to stocks? Bonds? Cash? Will you invest mainly through mutual funds or individual securities? What benchmarks will you measure investment returns against?

Include income tax considerations, since these can have a significant impact on what assets and allocation you have in the portfolio. Monitor, rebalance and amend. Review your investment policy statement at least once a year to see how the return and risk of your portfolio matches the desired return and risk of your written policy. Rebalance your investment mix, if the mix strays too far from your original allocations. You also may need to make adjustments if the overall performance of the portfolio is falling short of your goals.

An investment policy statement is not written in stone. Your personal financial circumstances may change, requiring more or less cash needs, or as you age in retirement you may want to be more conservative. Amend elements of your policy statement to reflect these changes.