An investment policy statement is a guideline – or blueprint – to a successful long term financial and investment plan. Some key elements of an investment policy statement are:

  • Investor Circumstances
  • Investment Objectives
  • Investor Time Horizon
  • Tax Preferences and Planning
  • Risk Tolerance
  • Asset Allocation Plan
  • Investment Philosophy
  • Liquidity Needs
  • Investment Selection Criteria
  • Investment Monitoring
  • IPS Review Frequency

And much more!

The Investment Policy Statement in our practice serves as a foundation for solid long term investment planning. There is no substitute to having the IPS in writing, and most importantly agreed upon by both client and advisor.

The Investment Policy Statement also serves as an agreement between the advisor and the client in one very key area – the asset allocation plan! The asset allocation plan controls in large part the risk exposure and volatility that the investor will see in their investment plan.  In fact that asset allocation policy will control over 90% of the investors returns (proven time and again through many studies).

Why you need an investment policy statement

Every investor needs an investment policy statement, here’s why!

A client of mine found this article by John Wasik in the New York Times. It’s a great opinion piece highlighting some of the benefits of solid investment planning using a written investment policy statement.

The benefits of a blueprint for your investments cannot be overstated. Unfortunately, most clients – and most advisors – don’t have one!

Make sure your advisor has a solid investment policy statement in place for your investment plan!