Why You Need an Investment Policy Statement ASAP (and How To Write One)
An investment policy statement is a formal document that defines one's investing objectives and strategy. Here we'll look at how to write one, the benefits of having one, a template, and an example.
// TIMESTAMPS:
00:00 - Intro
00:11 - What Is an Investment Policy Statement?
01:08 - Benefits of an Investment Policy Statement
03:43 - How To Write an Investment Policy Statement
05:21 - Investment Policy Statement Example
08:07 - Conclusion
// SUMMARY:
An investment policy statement is a document that outlines the parameters for how a portfolio will be managed and what its objectives are. They are used by portfolio managers of funds and between financial advisors and their clients.
The investment policy statement, or IPS for shorthand, keeps the investing strategy and its manager on the rails by setting guidelines within which the investment portfolio must be managed. Naturally, it contains information such as asset allocation, strategy, time horizon, goals, risk tolerance, monitoring procedures, review timelines, liquidity requirements, etc.
In the context of a portfolio manager or advisor-client relationship, the investment policy statement sets clear parameters that must be adhered to, such as asset types that can or cannot be bought in the portfolio, thereby establishing unwavering boundaries for the investment manager to work within. This provides clarity and peace of mind for the client and is one safeguard against misconduct. The document also provides a reference point for the manager to look back at anytime an investing decision is made, or for someone else to view to get a quick overview of one's investing plan.
While it may simply seem like a formality, an investment policy statement can prove extremely useful in times of uncertainty when you're tempted to make emotional adjustments to your portfolio that will likely prove more harmful than helpful. The IPS can be as simple or complex and as vague or specific as you'd like. If nothing else, it serves as a robust reminder and a guidepost to keep your investing plan on track.
Read the blog post here: https://www.optimizedportfolio.com/in...
Google Doc template: https://docs.google.com/document/d/1Q...
Plain Text (.txt) file template: https://www.optimizedportfolio.com/wp...
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