The Power of Writing an Investment Policy Statement
You deserve the most valuable financial solution possible. Most importantly, this solution should be one with your best interest as the main objective. In order to ensure this transpires for you, we include numerous tools and strategies in all of our management processes. The investment management process, in particular, combines building and continually adjusting your portfolio to stay consistent with your personal situation and financial goals. Within our Investment Management Process you will find an Investment Policy Statement.
What Is an Investment Policy Statement?
An Investment Policy Statement describes the investment philosophies and investment procedures to be followed in managing money. It is intended to provide thoughtful guidelines from which sound investment decisions can be made.
The Need for an IPS
The primary benefit of creating and following an IPS is to provide discipline for investment decisions. This discipline helps protect an investors’ portfolio from ad-hoc revisions during periods of market turmoil. Without it, investors could be inclined to make impromptu and possibly harmful decisions, driven by emotion, as opposed to, making thoughtful decisions based upon sound long-term investment principles.
Steps to Take to Establish an Investment Policy
- Identify your financial goals and needs.
- Determine your tolerance for risk and your time horizon.
- Set long term investment objectives.
- Identify any restrictions on the portfolio and its assets.
- Determine the asset allocation (i.e. mix of investment categories) to maximize the likelihood of achieving the investment objectives at the lowest level of risk.
- Determine the investment methodology to be used with regards to investment selection, rebalancing, buy-sell disciplines, portfolio reviews and reporting, etc.
- Implement the decisions.
Whether you partner with us or someone else, creating an Investment Policy Statement is an important tool used to provide thoughtful guidelines from which sound investment decisions can be made. Please feel free to contact us for more information on this or any of our wealth management solutions.
Posted: August 20, 2014
Authored By: Chad Sander, CFP®
Direct Phone: 812-602-6302
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