The Constitution Review and Update Protocol

First published 26 Aug 2026 · Last verified 29 Aug 2026

In Chapter 95, you wrote your personal investment constitution — the short, written document that states your goals, your risk tolerance, your asset allocation targets, and the rules you promise to follow no matter what the market is doing on any given Tuesday. In Chapter 96, you learned about the single greatest threat to that document: the override. The override is what happens when NEPSE (the Nepal Stock Exchange, the only stock exchange in the country) falls fifteen percent in a month and you suddenly decide that your "long-term, buy-and-hold" constitution was written by someone naive, and that the smarter, more "adaptive" thing to do is to rewrite the rules right now, in the middle of the storm, to justify selling everything.

This chapter is about the opposite problem, and it is a real problem, not a fake one invented to make the book longer. If Chapter 96 was about the danger of changing your constitution too easily, this chapter is about the danger of never changing it at all. A document that can never be amended is not a constitution — it is a prison. Nepal's own national constitution, the one promulgated in 2015 (2072 BS), has a formal amendment procedure written into it. It has been amended more than once since then, through a defined process, with defined thresholds, on a defined timetable, by people who were not in the middle of a riot when they did it. That is the model this chapter asks you to copy: not "never change," and not "change whenever you feel like it," but "change through a slow, scheduled, written procedure, for reasons that have nothing to do with this week's stock prices."

By the end of this chapter you will have three things: a clear test for telling legitimate reasons to amend your constitution apart from illegitimate ones, a step-by-step annual review checklist you can actually use every year, and a decision rule for what to do when your calm self of three years ago disagrees with your anxious self of this afternoon.

Lesson 98.1 — Why a Constitution That Never Changes Is Also a Mistake

Think about a young man who wrote his investment constitution at age 24, fresh out of university, working his first job in Kathmandu, no dependents, renting a room, sending a little money home to his parents in a district town. His constitution said: "I am young, I have decades before I need this money, I can tolerate large swings, so I will hold 80 percent equity and 20 percent debt (fixed-income instruments like bonds, debentures, and fixed deposits that pay a predictable return), and I will not touch the equity portion for at least ten years."

That was a correct constitution for a 24-year-old with no dependents. Now fast-forward. He is 34. He is married. He has a two-year-old daughter. His wife has left her job to care for the child for now. He has a home loan. His father, back in the village, has had a stroke and needs ongoing medical support that falls partly on him as the eldest son, which is a completely normal and expected obligation in most Nepali families. If, at 34, this man is still running the identical constitution he wrote at 24 — 80 percent equity, ten-year lockup mentality, no separate emergency fund line item, no thought given to what happens if he loses his job for six months — he is not being disciplined. He is being asleep at the wheel. His actual life has moved. His document has not. That gap is just as dangerous as the override, because it means the document is no longer describing the person who is using it.

Notice the two things that separate an amendment from an override: the trigger and the process. The trigger for a legitimate amendment is something that happened to you — your income, your family, your health, your time horizon. The trigger for an override is something that happened to the market. And the process for a legitimate amendment is slow and scheduled — you sit down at a pre-agreed time, ideally once a year, and you go through a checklist. The process for an override is fast and reactive — you make the decision the same day the bad news arrives, usually alone, usually anxious, usually with the edit already half-justifying a trade you have already decided to make.

A useful household analogy: a family budget. A sensible family sits down once a year, maybe around the Nepali new year in Baisakh, or at the start of the fiscal year in mid-July (Ashad end, when many Nepali households and businesses close their accounts), and revises the household budget because a child has started school and school fees are now a real line item, or because a family member has gone abroad for foreign employment and remittances are now arriving monthly. That is a legitimate budget revision. It is a different thing entirely for that same family to throw out the budget the day after a wedding invitation arrives and say "well, we're spending whatever we want this month, the budget clearly wasn't realistic." One is planning. The other is an excuse dressed up as planning. Your constitution deserves the first kind of treatment, not the second.

Lesson 98.2 — The Two Kinds of Change: Life Circumstances vs Market Circumstances

The single most useful diagnostic question you can ask yourself before touching your constitution is this: did something change about me, or did something change about the market?

Things that change about you are, by definition, things that would be true and worth acting on even if NEPSE had done nothing at all that year — even if the index had traded perfectly flat for twelve straight months. Marriage would still matter. A new baby would still matter. A promotion that doubled your salary would still matter. A parent's illness would still matter. These are facts about your life, not opinions about the market's next move.

Things that change about the market are, almost by definition, things you cannot act on without essentially becoming a market timer — someone trying to guess short-term price direction, which decades of evidence, in Nepal and everywhere else, shows most people cannot do reliably, including professionals. NEPSE fell. NEPSE rose. A particular banking stock you own reported a weak quarter. A brokerage house analyst issued a bearish note. Your friend at the tea shop said hydropower counters are "finished." None of that is a fact about your life. All of it is noise about prices, and prices are not the same thing as your circumstances.

The right-hand column matters as much as the left. Notice that even the legitimate triggers do not always mean "change your risk tolerance." A large raise, for instance, often just means you have more money to invest under the same rules, not that you should suddenly gamble more of it. That distinction — between changing how much you invest and changing how you invest — trips people up constantly, so hold onto it.

This is exactly the discipline collapse described in Chapter 96, wearing a disguise. Chapter 96 warned you about the override that says "the market has changed, therefore my rules should change." This chapter's warning is the mirror image and, in some ways, more dangerous, because it sounds so reasonable: "my risk tolerance has changed" is a sentence that could be describing a real, legitimate life event, or could be describing nothing more than fear wearing the vocabulary of financial planning. The only way to tell the two apart is the test above: would this be true if the market had done nothing?

Lesson 98.3 — The Annual Review Protocol

Because ad-hoc review is exactly how overrides sneak in, the discipline is to make review boring and scheduled, like a health checkup, rather than exciting and reactive, like an emergency room visit. Pick one fixed date each year and put it in your calendar the same way you would put in a festival date. Many Nepali investors find it natural to anchor this to something already meaningful — the start of the new fiscal year at the end of Ashad/start of Shrawan (mid-July), when banks, brokerages, and most companies close their books anyway and annual statements start arriving; or the Nepali new year in Baisakh; or simply your own birthday. What matters is that the date is fixed in advance, not chosen in reaction to a headline.

Here is the checklist, step by step.

Step one: gather your documents. Pull your demat account statement (the electronic record of the shares you hold, maintained through your Depository Participant, or DP, which is typically your broker or a licensed bank), your bank statements, your existing written constitution from Chapter 95, and your log of any promises or rules you set for individual holdings. You cannot review honestly from memory. Memory edits itself in your favour.

Step two: review your actual life, not your portfolio, first. Before you look at a single stock price, write down anything that has genuinely changed in your life in the past year: income, job, marital status, dependents, health, housing, major debts, and how many years remain until your next big goal. This step is deliberately placed before you look at numbers, because if you look at the portfolio's performance first, the emotional reaction to that performance will color how you answer questions about your life. You might convince yourself your risk tolerance has "matured" simply because the portfolio had a rough year. Doing the life review first protects you from that.

Step three: compare your life review against your existing constitution's assumptions. Your Chapter 95 document should have stated, in writing, the assumptions behind your allocation: your age, your dependents, your job stability, your time horizon. Check each assumption against what you just wrote in step two. Where they still match, leave that section of the constitution untouched. Where they no longer match, flag that section for amendment.

Step four: check your allocation against your targets, and rebalance if needed. Rebalancing means bringing your actual mix of assets back toward your target mix — for example, if your constitution says 70 percent equity and 30 percent debt, and a strong year in NEPSE has pushed you to 82 percent equity because the equity portion grew faster, you sell a slice of equity and add to debt to get back to 70/30. This is a mechanical, calendar-driven action, not a market call. You are not selling because you think the market will fall. You are selling because your own prior rule told you to keep a certain ratio, and the ratio has drifted.

Step five: review costs and frictions. Check your brokerage commission rates, your DP annual fee, any margin lending interest you have paid, and whether your broker relationship still serves you well. Nepal's brokerage and DP fee structures are regulated by SEBON (the Securities Board of Nepal, the market regulator) but do vary somewhat by provider and change occasionally by circular, so this is worth a yearly look even though it rarely produces a big change.

Step six: review your watchlist and your circle of competence (the set of businesses and sectors you actually understand well enough to judge). Are you still comfortable with every sector you hold — banking, hydropower, insurance, microfinance, hotels, whatever your mix is — or has one become something you hold out of habit rather than understanding? This is also the moment to ask whether any exclusion rule you set for yourself in the past (say, "I will not invest in finance companies") still has a real reason behind it, or has simply calcified into superstition. We will come back to this exact question in Lesson 98.5.

Step seven: write the amendment, date it, and sign it. If changes are needed, write them into the constitution document itself, in a new dated section, rather than deleting the old text. Keep the old language visible, struck through or clearly marked as superseded, with the date and the reason for the change written next to it. This creates a paper trail of your own reasoning that future-you can consult — which is exactly what you will need in Lesson 98.5 when a future stressed version of yourself wants to know whether past calm-you had a good reason for a rule.

Step eight: set the date for next year's review before you close the document.

Lesson 98.4 — Life Events That Legitimately Trigger a Review Outside the Annual Cycle

The annual review is the default rhythm, but certain events are big enough that you should not wait for the calendar date. These are the "life-event triggers," and the test from Lesson 98.2 still applies to each one: would this matter even if the market were flat?

Marriage or forming a joint household. Your goals, your risk tolerance, and often your household cash flow are no longer only about you. A spouse may have their own income, their own debts, their own risk appetite, and the two of you now share at least some financial goals — a home, children's education, care of aging parents on either side. This is worth an out-of-cycle review, not to make the marriage a reason to gamble more or less, but to make the document accurately describe a two-person household instead of a one-person household.

Birth of a child. This is one of the most common and most legitimate triggers in the Nepali context, given how central children's education is to most family financial planning. A birth typically means: raise your emergency fund target (because a household with a dependent child needs a thicker buffer than a household without one), consider a dedicated education goal bucket with its own time horizon, and check whether you and your spouse have adequate life and health insurance, since insurance is really a financial planning tool that protects the plan itself against catastrophe, not an investment product.

Job loss or a significant, sustained drop in income. If your income has genuinely fallen — not "the market fell" but "my salary or remittance income fell" — your capacity to bear risk has fallen too, and your constitution should reflect a more conservative posture, at least temporarily, along with a pause on new equity purchases until your cash flow stabilises.

A significant, durable rise in income. A promotion, a new higher-paying job, or in Nepal's case very often a family member moving abroad for foreign employment (to the Gulf countries, Malaysia, Korea, or elsewhere) and remittance income becoming a steady new inflow. The correct response here is usually to increase how much you invest, following your existing rules, rather than to change the rules themselves in excitement. New money is not a license for new risk-taking; it is simply more fuel for the same engine.

Approaching a major goal. When you move within roughly five to ten years of a big target date — buying a house, funding a child's higher education, or retirement — this is the classic trigger for what financial planners call a glide path: a gradual, pre-planned shift of the portfolio from growth-oriented assets like equities toward capital-preservation assets like fixed deposits, government bonds, and debentures, so that a market downturn in the final year or two before you need the money cannot wreck the goal.

A health event, in yourself or a dependent. Serious illness changes both your near-term liquidity needs and your appetite for locking money away in illiquid or volatile assets.

Lesson 98.5 — Disagreeing With Your Own Past Self

Here is the situation this lesson exists for. You are sitting in front of your constitution, in the middle of a stressful week, and you disagree with something your past self wrote. Maybe two years ago, calm and rested, you wrote a rule that now feels wrong to you today, anxious and rattled. Which version of you should win?

The general answer, and the one this entire Part of the book has been building toward, is that the calmer self usually has better judgment than the more stressed self, for a simple and well-documented reason: acute stress, fear, and euphoria all measurably narrow attention and shorten time horizons in the human brain. A person who is frightened is, on average, a worse long-range planner than the same person a month earlier when nothing frightening was happening. This is not a moral failing; it is closer to a design feature of how brains handle threat. So the default tiebreaker rule is: trust the version of yourself who wrote the rule on a calm day, over the version of yourself who wants to break the rule on a frightening day.

But — and this is the honest complication this lesson has to deal with — the calmer past self is not automatically right just because they were calm. Calm people can also reason from bad information, outdated assumptions, or a mistaken belief they never tested. So the real question is not simply "who was calmer," it is "which version of me is deciding from a better process." A decision made calmly, with full information, reasoning carefully from your actual goals, deserves deference even when it now feels uncomfortable. A decision made calmly but based on incomplete information, a superstition, or a single bad past experience wrongly generalised, does not deserve the same deference just because nobody was crying when it was written.

This gives you two separate questions to ask whenever present-you and past-you disagree.

First: has new, real information arrived since the rule was written — a fact about the world or about you, not just a new emotion? Second: was the original rule reasoned carefully from principle, or was it itself already an emotional reaction that simply happened to get written down and therefore looks official?

Look closely at the third row of that table, because it is the trickiest case and connects directly back to Lesson 98.3's step six. Sometimes what looks like "my wise past self's rule" is actually an old panic that simply had time to harden into habit. A person who lost money in one finance company during a difficult period years ago might have written into their constitution, "never invest in finance companies," and treated that rule ever since as sacred, unquestionable wisdom from a calmer time. But if you trace it back honestly, that rule was never calm reasoning from principle — it was fear, written down once and never revisited. The fix for this is not to break the rule mid-panic today. The fix is to bring it up at your next scheduled annual review, examine it honestly using the process in Lesson 98.3, and if it truly has no remaining justification beyond an old wound, amend it through the proper channel, dated and documented like any other legitimate change.

Lesson 98.6 — A Worked Example: One Investor, One Decade, Five Legitimate Revisions

To make all of this concrete, follow a single fictional investor, Sushila, through ten years of scheduled, legitimate constitution revisions, each one triggered by an actual change in her life rather than a change in the market. Sushila writes her first constitution at 26.

Year 1 (age 26). Sushila works at a private company in Kathmandu, unmarried, living with a roommate, sending a modest amount home to her parents in Chitwan every month. Her Chapter 95 constitution states: goal is long-term wealth building with no fixed near-term target; time horizon is at least fifteen years; risk tolerance is high given her age, health, and lack of dependents; target allocation is 75 percent equity across a diversified mix of banking, hydropower, and a few manufacturing counters, and 25 percent in fixed deposits and a small cash buffer equal to four months of expenses; rule: no single stock above 12 percent of portfolio; review date: every year at the start of Shrawan, right after fiscal year close.

Year 3 (age 28). Sushila marries. At her scheduled Shrawan review, she applies the checklist from Lesson 98.3. Life review: newly married, husband employed in the tourism sector with seasonal income swings, no children yet, considering a joint home purchase in five to seven years. Constitution assumptions still valid: long time horizon, high general risk tolerance, stock-level concentration rule. Assumptions no longer valid: the four-month cash buffer was sized for a single income earner with stable salary; it should now account for her husband's seasonal dips. Amendment: raise the joint emergency buffer to six months of combined household expenses, and flag that in five to seven years a house-purchase glide path will need to begin. Nothing here was triggered by NEPSE. It was triggered by marriage and a joint household.

Year 5 (age 30). Their first child is born. At the next scheduled review — and notably, the timing happens to fall only two months after the birth, which is close enough to the annual date that Sushila folds it into the same review rather than treating it as a separate emergency session — she adds a dedicated education goal with an eighteen-year horizon, raises the household emergency buffer again to account for a dependent child, confirms both she and her husband hold adequate life insurance, and trims her equity allocation slightly from 75 to 70 percent, moving the difference into government bonds, to reduce the household's overall volatility now that a child depends on the plan working.

Year 6 (age 31). NEPSE goes through a sharp, painful correction over several months, driven by tightened margin lending rules and a broader liquidity squeeze in the banking sector. Sushila's portfolio value drops meaningfully on paper. This is exactly the kind of month Chapter 96 warned about, and it is exactly the kind of month this chapter says to sit still through. Nothing has changed in her actual life. Her scheduled review is still four months away. She waits. When the scheduled Shrawan review does arrive, she goes through the full checklist: life review shows no change — same job, same marriage, same one child, same horizon. Constitution assumptions all still valid. She rebalances mechanically back toward her 70/30 target, since the correction had actually pushed her below target equity weight, meaning her own rule now tells her to buy modestly into the weakness, not sell out of fear. This is the single clearest illustration in her whole decade: the market moved a great deal, and her constitution did not move at all, because nothing about her life had moved.

Year 8 (age 33). Her husband takes a two-year contract job abroad, and steady remittance income begins arriving monthly, larger than what the household spent before. At her scheduled review, Sushila does not treat this windfall as license to gamble. She increases her monthly investment contribution substantially, following the exact same 70/30 allocation and the same 12-percent single-stock rule as before. The new money follows the old rules. She does add one genuinely new element: because the family's cash flow is now less dependent on any single local salary, and more resilient to short-term local job market shocks, she notes this as a modest improvement in the household's risk capacity — but rather than reactively raising her equity percentage in the same sitting, she writes it down as a "candidate change to consider only if the pattern holds for two more annual reviews," deliberately building in a delay so that a temporary windfall cannot be mistaken for a permanent shift.

Year 9 (age 34). At this review, Sushila revisits her original constitution's exclusion rules, as part of the routine checklist step six. She finds a note from Year 1: "avoid microfinance company shares — a colleague lost money in one and warned me off the whole sector." Applying the test from Lesson 98.5, she asks whether this was calm reasoning from principle or an old, unexamined fear inherited from someone else's bad experience. She concludes honestly that it was the latter — she has never actually studied microfinance company fundamentals, balance sheets, or regulatory position with NRB (Nepal Rastra Bank, the central bank that regulates banks and many microfinance institutions), she simply absorbed a friend's fear years ago. Rather than acting on this mid-week, she schedules genuine study of the sector before the next annual review, and only removes the exclusion the following year, after doing that work, writing the reasoning into the amended document exactly as Lesson 98.3's step seven describes — old rule struck through, dated, replaced with a new rule reflecting actual study rather than borrowed fear.

Year 10 (age 35). The couple is now considering buying a home within five years. This is squarely a "approaching a major goal" trigger from Lesson 98.4. Sushila begins a formal glide path: over the coming five years, at each scheduled review, equity allocation for the house-fund portion of the portfolio (kept mentally separate from the long-term retirement portion) will step down by roughly ten percentage points a year, moving progressively into fixed deposits and short-maturity government securities, so that by the year they actually need the down payment, that portion of the money is no longer exposed to a NEPSE downturn arriving at the worst possible moment.

Look back over that decade. Five real amendments happened: marriage, first child, a considered response to windfall income, a corrected exclusion rule, and a glide path ahead of a major goal. Every one of them would have made sense even if NEPSE had simply traded flat the entire decade, because every one of them was a fact about Sushila's life, not a reaction to a stock price. And in the one year that featured genuine market drama — the Year 6 correction — the constitution did not move an inch until the scheduled date arrived, and even then it moved only because the mechanical rebalancing rule called for it, not because fear did.