{"id":10752,"date":"2021-05-13T07:19:29","date_gmt":"2021-05-13T11:19:29","guid":{"rendered":"http:\/\/staging-prblog.paladinregistry.com\/blog\/?p=10752"},"modified":"2024-08-28T05:51:59","modified_gmt":"2024-08-28T09:51:59","slug":"investment-policy-statement","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/","title":{"rendered":"What is an Investment Policy Statement (IPS) and How Do You Write One?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_68_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d04e68826c4\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d04e68826c4\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#Before_we_begin_lets_first_find_out_what_an_Investment_Policy_Statement_IPS_is_shall_we\" title=\"Before we begin, let\u2019s\nfirst find out what an Investment Policy Statement (IPS) is, shall we?\">Before we begin, let\u2019s\nfirst find out what an Investment Policy Statement (IPS) is, shall we?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#Now_before_we_go_further_lets_just_pause_for_a_minute_and_dwell_on_why_you_need_an_investment_policy_statement_in_the_first_place\" title=\"Now before we go further,\nlet\u2019s just pause for a minute and dwell on why you need an investment policy\nstatement in the first place.\">Now before we go further,\nlet\u2019s just pause for a minute and dwell on why you need an investment policy\nstatement in the first place.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#What_Does_an_Investment_Policy_Statement_Contain\" title=\"What Does an Investment\nPolicy Statement Contain?\">What Does an Investment\nPolicy Statement Contain?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#How_do_you_Write_an_Investment_Policy_Statement\" title=\"How do you Write an\nInvestment Policy Statement?\">How do you Write an\nInvestment Policy Statement?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#1_Set_your_investing_goals_right_at_the_start\" title=\"1. Set your investing goals right at\nthe start\">1. Set your investing goals right at\nthe start<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#2_Define_the_scope_of_the_responsibilities_and_duties_of_your_financial_advisor\" title=\"2. Define the\nscope of the responsibilities and duties of your financial advisor\">2. Define the\nscope of the responsibilities and duties of your financial advisor<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#3_Jot_down_your_investing_strategy\" title=\"3. Jot down your investing strategy\">3. Jot down your investing strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#4_Share_your_existing_investments\" title=\"4. Share your\nexisting investments\">4. Share your\nexisting investments<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#5_State_your_preference_concerning_your_asset_allocation\" title=\"5. State your\npreference concerning your asset allocation\">5. State your\npreference concerning your asset allocation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#7_Specify_appropriate_metrics_for_risk_measurement_and_evaluation\" title=\"7. Specify\nappropriate metrics for risk measurement and evaluation\">7. Specify\nappropriate metrics for risk measurement and evaluation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#8_Assess_dos_and_donts_when_managing_your_portfolio\" title=\"8. Assess do\u2019s and don\u2019ts when managing your portfolio\">8. Assess do\u2019s and don\u2019ts when managing your portfolio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#9_Determining_costs_and_fees_up_to_an_acceptable_level\" title=\"9.\nDetermining costs and fees up to an acceptable level\">9.\nDetermining costs and fees up to an acceptable level<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#10_Rebalance_your_portfolio_at_regular_intervals\" title=\"10. Rebalance your portfolio at regular intervals\">10. Rebalance your portfolio at regular intervals<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#Why_is_Writing_an_Investment_Policy_Statement_Essential_Before_You_Choose_to_Invest\" title=\"Why is Writing an Investment\nPolicy Statement Essential Before You Choose to Invest?\">Why is Writing an Investment\nPolicy Statement Essential Before You Choose to Invest?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#To_Conclude\" title=\"To Conclude\">To Conclude<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Before_we_begin_lets_first_find_out_what_an_Investment_Policy_Statement_IPS_is_shall_we\"><\/span><strong>Before we begin, let\u2019s\nfirst find out what an Investment Policy Statement (IPS) is, shall we?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An IPS (Investment Policy Statement) refers to a document that entails\nyour goals, targets, and investments vis-a-vis your investment. It provides a <a href=\"https:\/\/www.paladinregistry.com\/about-advisors\/fa-fidicuary-status\">roadmap to your financial\nadvisor<\/a>\noffering them an exact vision of your goals on how you want your money\ninvested, where you want to invest it, and how much you wish to invest. This is\nundertaken so that any or all critical financial decisions taken align with\nyour requirements. One can even say that an IPS is like a compilation of rules\nfor your financial advisor, acting as a guide on how they should manage your\nfunds. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Now_before_we_go_further_lets_just_pause_for_a_minute_and_dwell_on_why_you_need_an_investment_policy_statement_in_the_first_place\"><\/span><strong>Now before we go further,\nlet\u2019s just pause for a minute and dwell on why you need an investment policy\nstatement in the first place.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Say you want to invest your money but you need a clear plan of action\nto achieve a successful outcome. Having a plan of action allows you to have an\naccurate view of your financial goals and expectations and ensures that you\nstay true to the course while keeping financial anxiety and insecurities at\nbay. An IPS provides a plan of action for you as well as your financial advisor\nmakes sure that all the i\u2019s have been dotted and t\u2019s crossed when it comes to\nyour investments. <\/p>\n\n\n\n<p>Read on further to find out what an investment policy statement\nentails and how you can write one yourself. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Does_an_Investment_Policy_Statement_Contain\"><\/span><strong>What Does an Investment\nPolicy Statement Contain? <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An IPS consists of various elements that differ for different\ninvestors and are dependent upon their financial goals, investment strategies,\nand risk capacity. Typically, an IPS can be divided into two parts:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Your individual goals and investment<br>     strategy<\/li>\n\n\n\n<li>The kind of assistance you require from<br>     your financial advisor<\/li>\n<\/ol>\n\n\n\n<p>The first part of the statement deals with your personal financial\ngoals and investment strategy and contains the following information:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Investment<br>purpose<\/strong>: The aim<br>behind investing varies from person to person. While for some their primary<br>goal would be to augment their wealth, for others generating a secondary source<br>of income may be the prime motivating factor. You could belong to either of the<br>aforesaid categories. Other reasons for investing could be looking to fund your<br>child\u2019s future education, buy a home, or for your future retirement plans. <\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Time<br>horizon<\/strong>: In this<br>part, how soon or late you want to achieve your investment goals comes into<br>play. Are you looking for short-term or long-term goals? The timeline plays a<br>critical role in determining the direction your investment strategy will take. <\/li>\n\n\n\n<li><strong>Allocation<br>of assets<\/strong>: In this<br>section, the<a href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/1-investment-myth-effectively-managing-your-own-investment-portfolio\/\"> composition of your investments<\/a> takes center stage. Here, assets would<br>include but are not limited to the percentage of stocks, bonds, real estate,<br>mutual funds, cash, dividends, etc.<\/li>\n\n\n\n<li><strong>Asset<br>liquidity<\/strong>: This part<br>governs information on your income and liquidity needs. A lot of investors<br>treat their investments as a source of funds that they can quickly encash in<br>cases of emergency. To do so, the investment options in your portfolio should<br>be highly liquid and easily accessible. <\/li>\n\n\n\n<li><strong>Investment preferences<\/strong>: Your investment preferences indicate whether<br>you want a portfolio that\u2019s actively managed or looked after passively. The<br>difference between the two is that in an actively managed investment portfolio<br>a manager or management team makes decisions on how to invest the fund\u2019s money<br>whereas in a passively managed one the fund simply follows a market index.<br>Moreover, this part also deals with your choice of investments such as social<br>impact investing, etc. <\/li>\n<\/ul>\n\n\n\n<p>The second part of your IPS primarily deals with the kind of\nassistance you require from your financial or investment advisor. This\ntypically includes:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Duties<br>of the financial advisor: <\/strong><a href=\"https:\/\/www.paladinregistry.com\/about-advisors\/fa-fidicuary-status\">Your financial advisor has<br>several responsibilities or duties <\/a>that he\/she must undertake vis-a-vis where to<br>invest, the execution of your financial plan, tracking your investments, and,<br>but not limited to, suggesting recommendations to alter your investment<br>strategy if your investment goals are not being met.<\/li>\n\n\n\n<li><strong>Asset<br>allocation: <\/strong>Your<br>financial advisor must also decide where <a href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/1-investment-myth-effectively-managing-your-own-investment-portfolio\/\">your investments are being<br>allocated <\/a>&#8211; whether<br>they\u2019re being invested in stocks, bonds, cash, bullion, etc. <\/li>\n\n\n\n<li><strong>Keeping<br>track of the investments: <\/strong>This<br>typically includes keeping track of your investments, i.e., keeping tabs on the<br>progress and growth of your funds, managing risk, diversifying and rebalancing<br>your portfolio, etc. <\/li>\n<\/ul>\n\n\n\n<p>To do a quick recap, you now have a brief idea about what an\ninvestment policy statement is and the different elements associated with it.\nNow let\u2019s get on with the main course, shall we?<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_do_you_Write_an_Investment_Policy_Statement\"><\/span><strong>How do you Write an\nInvestment Policy Statement?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The different steps involved in writing an investment policy statement\nare as follows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Set_your_investing_goals_right_at_the_start\"><\/span><strong>1. Set your investing goals right at\nthe start<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When you\nbegin writing your IPS, it&#8217;s best to write down your reasons for investing.\nWhat are the objectives that you wish to achieve? Jot those down along with a\ntimeline for achieving them. Here\u2019s how you can start:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Put in writing your investment goals:<\/strong> Everyone has different goals when it comes to investing but some of<br>the typical ones are retirement, a child\u2019s higher education, buying a home,<br>travel, health care, etc.<\/li>\n\n\n\n<li><strong>Mention the timeline: <\/strong>Every goal<br>has a different timeline. They can be either short-term goals or long-term<br>ones. Say, for example, retirement can be a long-term goal whereas buying a<br>home or saving for a child\u2019s education can be termed as short-term goals<br>depending on when you start investing. <\/li>\n\n\n\n<li><strong>Set priorities:<\/strong> You also<br>have to prioritize each goal which may be dependent upon other factors such as<br>your family\u2019s needs, income, age, etc. <br><br><br><br><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Define_the_scope_of_the_responsibilities_and_duties_of_your_financial_advisor\"><\/span><strong>2. Define the\nscope of the responsibilities and duties of your financial advisor<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Herein, you\nshould clearly state the duties to be undertaken by your financial advisor as\nwell as define the scope of their responsibilities. These may include risk\nanalysis, monitoring of assets, recommendations as well as management of your\nportfolio. You can also mention the degree of control and flexibility your\nadvisor should have over your portfolio concerning the decisions on your\ninvestment profile. Moreover, you can state any expectations that you may have\nfrom your advisor here. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Jot_down_your_investing_strategy\"><\/span><strong>3. Jot down your investing strategy <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>At this\njuncture, lay down information regarding your investment strategy which\nincludes:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How<br>aggressive or passive you want your investment strategy to be<\/li>\n\n\n\n<li>Whether you<br>want a more active or passive investment management style <\/li>\n\n\n\n<li>Your risk<br>appetite<\/li>\n\n\n\n<li>Your<br>preference for asset allocation<\/li>\n\n\n\n<li>Your<br>liquidity needs<br><br><br><br><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Share_your_existing_investments\"><\/span><strong>4. Share your\nexisting investments<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you have\nany existing investments or savings, it helps your financial advisor assess\nyour future investment needs. Plus, it helps them calculate the current worth\nof your investments and suggest financial products or instruments that can help\nyou gain better returns. Moreover, it would be great if you can also include\ninformation such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Any existing retirement accounts you may already have such as an employer-sponsored <a href=\"https:\/\/www.paladinregistry.com\/blog\/retirement\/what-is-a-401k-and-how-does-a-401k-work\/\">401(k) account<\/a>, an <a href=\"https:\/\/www.paladinregistry.com\/blog\/retirement\/what-is-an-ira\/\">Individual Retirement Account (IRA)<\/a>, a pension plan, a life annuity plan, etc.<\/li>\n\n\n\n<li>Any savings account you may have such as a 529 education savings plan, bank accounts, certificate of deposits (CDs), etc.<\/li>\n\n\n\n<li>Any real estate investments you\u2019ve made such as a house, commercial property, etc. <\/li>\n\n\n\n<li>Any existing cash reserves you may have<br> <br> <\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_State_your_preference_concerning_your_asset_allocation\"><\/span><strong>5. State your\npreference concerning your asset allocation <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When you\u2019re writing down an investment policy statement you have to\nspecify any preferences that you may have concerning the percentage of equity,\ndebt, and balanced funds in your portfolio. Say, for example, your asset\nallocation can be a mix of 80% equity funds and 20% debt funds. <\/p>\n\n\n\n<p>Moreover, you can also state your preference when it comes to stocks\nand bonds and where you\u2019d like more of your investment funds to be invested.\nFurthermore, you can pick between investing in traditional real estate or a\nreal estate investment trust (REIT), etc.&nbsp;&nbsp;\n<\/p>\n\n\n\n<style type=\"text\/css\">\r\n  .articles-ad-page {\r\n   border-top: 1px solid #ADADAD;\r\n   border-bottom: 1px solid #ADADAD;\r\n   padding: 15px 0;\r\n   margin-bottom: 10px;\r\n   display: block;\r\n  }\r\n\t.articles-ad-page {padding: 10px 5px; border-top: 1px solid #BEBEBE; border-bottom: 1px solid #BEBEBE; margin-bottom: 20px;\t}\r\n\t.articles-ad-page img {float: left; margin-right: 20px; max-width: 140px; margin-top: 5px; margin-bottom: 5px; border-radius: 0;}\r\n\t.articles-ad-page .txt {line-height: 21px; margin-bottom: 0; font-size: 14px; margin-top: 4px; }\r\n  .articles-ad-page .txt p{font-size: 14px;}\r\n  .articles-ad-page .txt p a{color: #035184 !important; font-weight: bold; text-decoration: none;}\r\n  .spocored-text{color: #cac5c5; font-weight: 500; float: right; font-size: 12px;}\r\n  .wa-text{color: #183a68; font-weight: bold; float: left; font-size: 12px;}\r\n  .articles-ad-page .alignleft{ float:left!important;}\r\n  .txt-head{margin-bottom: 2px; text-align: left; margin-top: -6px;}\r\n  .txt-text{margin-bottom: 14px;}\r\n  @media screen and (max-width:767px) and (min-width:320px){\r\n      .articles-ad-page .txt-head {margin-top: -15px; float: left; width: 50%;}\r\n      .articles-ad-page .txt {width: 100% !important; margin-top: 12px;}    \r\n      .articles-ad-page { display: block;}\r\n    }\r\n  @media screen and (max-width: 360px) and (min-width: 320px){\r\n    .articles-ad-page .txt-head a {\r\n        font-size: 16px!important;\r\n        line-height: 16px!important;\r\n    }\r\n    .articles-ad-page .txt-head{\r\n        margin-right: 14px;\r\n            width: 45%;\r\n    } \r\n    .articles-ad-page img{ margin:0 10px 10px 0px!important;}\r\n  }\r\n<\/style>\r\n\r\n\r\n<p><span class=\"spocored-text\" >SPONSORED<\/span> <span  class=\"wa-text\">WISERADVISOR<\/span><\/p>\r\n<div class=\"clearfix\"><\/div>\r\n<div class=\"Articles-ad-page\"><img decoding=\"async\" class=\"alignleft-new\" style=\"margin-top: 0px;\" src=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2023\/03\/ads-image-1.jpg\" alt=\"ad_article\" width=\"\" height=\"\"><p><\/p>\r\n<div class=\"txt-new\">\r\n<p style=\"margin-bottom: 22px;\"> <a href=\"https:\/\/www.wiseradvisor.com\/match_advisors.asp?kwd=paladin-blog-ad-investment-policy-statement&amp;utm_medium=middle\" style=\"color:#035184;     font-size: 20px;font-weight: 700; text-decoration: none;\" target=\"_blank\" rel=\"noopener noreferrer\">Need a financial advisor? Compare vetted experts matched to your needs. Compare credentials and fees.<\/a><\/p>\r\n<p>Choosing the right financial advisor is daunting, especially when there are thousands of financial advisors near you. We make it easy by matching you to vetted advisors that meet your unique needs. Matched advisors are all registered with FINRA\/SEC.  <a href=\"https:\/\/www.wiseradvisor.com\/match_advisors.asp?kwd=paladin-blog-ad-investment-policy-statement&amp;utm_medium=middle\" target=\"_blank\" style=\"font-weight: 700;    color: #035184;\" rel=\"noopener noreferrer\">Click to compare vetted advisors now.<\/a><\/p>\r\n<\/div>\r\n<div class=\"clearfix\"><\/div>\r\n<\/div>\r\n\r\n\r\n\n\n\n\n<p>The investment policy statement should clearly express your general\nphilosophy as an investor when it comes to tolerance for risk. It should\nspecify that your investment portfolio will be subject to an assumption of risk\nand the returns may either be positive or negative over time. These risks are\nvaried in nature and are typically associated with issues related to liquidity,\nlegal, political, regulatory, longevity, mortality, business, and\/or health risks.\nApart from specifying the aforesaid risks, the IPS should also define\nacceptable paths of risk. This means in light of personal risks such as a job\nloss or disability, your IPS should specify a threshold in case of an absolute\nloss and have policies and procedures in place to minimize the risk of further\nloss so that it doesn\u2019t completely derail your investment portfolio.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7_Specify_appropriate_metrics_for_risk_measurement_and_evaluation\"><\/span><strong>7. Specify\nappropriate metrics for risk measurement and evaluation<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Once you\u2019ve defined your risk tolerance, you also need to set the\nmetrics by which the risk profile of your investment portfolio would be\nassessed and evaluated to make meaningful comparisons over time. You should be\nimpartial when it comes to evaluating certain risks, taking care not to\nhighlight nor disguise any of them. Some of the metrics that you can use to\nassess the risk profile of your portfolio are standard deviation, Sharpe ratio,\nR squared, beta, etc. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"8_Assess_dos_and_donts_when_managing_your_portfolio\"><\/span><strong>8. Assess do\u2019s and don\u2019ts when managing your portfolio <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>This\nparticular section pertains to a number of items that your financial advisor\nshould adhere to such as: <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>When to<br>revisit your asset allocation<\/li>\n\n\n\n<li>Monitoring<br>the performance of your investments and at which point to step in<\/li>\n\n\n\n<li>Whether there<br>is any need for annual, monthly, or quarterly reports <\/li>\n\n\n\n<li>How<br>diversified your portfolio should be<br><br><br><br><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"9_Determining_costs_and_fees_up_to_an_acceptable_level\"><\/span><strong>9.\nDetermining costs and fees up to an acceptable level<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>There are several fees involved when it comes to running investment and savings accounts like administration fees, management fees, <a href=\"https:\/\/www.paladinregistry.com\/costs-of-hiring-a-financial-advisor\">fiduciary fees<\/a>, and consulting charges, account maintenance fees, commissions, etc. Additionally, the expense ratio of an investment can have a considerable effect on your returns. You can set a threshold limit for these costs stating what is acceptable and what is not. What this does is gives your financial advisor insight into which investments would be suitable for your investment portfolio. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"10_Rebalance_your_portfolio_at_regular_intervals\"><\/span><strong>10. Rebalance your portfolio at regular intervals<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Rebalancing\nmeans restoration of your portfolio to its target allocation, or in other\nwords, bringing it back to the desired asset mix. For example, if you started\nwith a 65% equity which got bumped up to 75% due to market fluctuations,\nrebalancing would involve bringing your asset allocation to the original 65%\nequity.<\/p>\n\n\n\n<p>When it comes\nto rebalancing your portfolio, timing along with fixing an acceptable range\nplays a critical role in determining when you choose to step in. Say, you fix a\njump or drop of 5% as being acceptable; however, anything beyond that would\nrequire you to step in and rebalance your portfolio. <\/p>\n\n\n\n<p>Now that\nyou\u2019ve gone over the steps that you need to take to write an investment policy\nstatement, it\u2019s time to discuss why you need to have one in the first place. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_is_Writing_an_Investment_Policy_Statement_Essential_Before_You_Choose_to_Invest\"><\/span><strong>Why is Writing an<\/strong> <strong>Investment\nPolicy Statement Essential Before You Choose to Invest?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Having an investment policy statement in place before you embark on\nyour investment journey brings you several advantages. These are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Defines the role of the investment advisor<\/strong>: The first and foremost function of an IPS is that it clearly states the role of the financial advisor. What this does is that it eliminates the possibility of your advisor either overstepping his\/her boundaries or not being involved enough in your investment decisions.\u00a0 <\/li>\n\n\n\n<li><strong>Acts as a guide: <\/strong>AnIPS also helps you lay out a vision for your portfolio and acts as a roadmap for both the investor and the investment advisor. It keeps both parties honest and true to each other ensuring nobody transgresses from the main motive behind your investments. <\/li>\n\n\n\n<li><strong>Assists in achieving your financial goals: <\/strong>The simple act of writing down your goals acts as a motivator for you to stick to your investment strategy and serves as a way to make sure that you reach your financial goals in the designated time stated by you. <\/li>\n\n\n\n<li><strong>Evaluates the need for rebalancing: <\/strong>Your portfolio needs to be rebalanced from time to time due to variances incurring because of market fluctuations. By penning down your investment policy statement you can better adapt and make changes in your investment approach and methods. <\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"To_Conclude\"><\/span> <strong>To Conclude <\/strong> <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An IPS is an essential document in your investment journey that serves as a point of action leading you in the right direction. It helps ensure that you meet your financial goals and objectives in the timeline you\u2019ve envisioned for yourself. You can stay on top of your financial targets that you\u2019ve set for yourself while giving shape to your investment, nurturing it with time and money. You may write an investment policy statement yourself and not rely on a financial advisor if you\u2019re inclined to do so. You can also seek help and direction from a <a href=\"https:\/\/www.paladinregistry.com\/landing\/find-financial-advisors?cta=get-match-button-top-home\">financial advisor<\/a> while making an investment policy statement or, for that matter, any other investment decision. <\/p>\n\n\n\n<p><em> To learn more about the author William Hayslett view his <a href=\"https:\/\/www.paladinregistry.com\/blog\/author\/william-hayslett\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"short bio (opens in a new tab)\">short bio<\/a>. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Before we begin, let\u2019s first find out what an Investment Policy Statement (IPS) is, shall we? An IPS (Investment Policy Statement) refers to a document that entails your goals, targets, and investments vis-a-vis your investment. It provides a roadmap to your financial advisor offering them an exact vision of your goals on how you want your money invested, where you want to invest it, and how much you wish to<\/p>\n","protected":false},"author":122,"featured_media":10768,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[395],"tags":[],"class_list":["post-10752","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is an Investment Policy Statement (IPS)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is an Investment Policy Statement (IPS)\" \/>\n<meta property=\"og:description\" content=\"Before we begin, let\u2019s first find out what an Investment Policy Statement (IPS) is, shall we? An IPS (Investment Policy Statement) refers to a document that entails your goals, targets, and investments vis-a-vis your investment. It provides a roadmap to your financial advisor offering them an exact vision of your goals on how you want your money invested, where you want to invest it, and how much you wish to\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/\" \/>\n<meta property=\"og:site_name\" content=\"Paladin Registry Blog\" \/>\n<meta property=\"article:published_time\" content=\"2021-05-13T11:19:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-08-28T09:51:59+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2021\/05\/policy.webp\" \/>\n\t<meta property=\"og:image:width\" content=\"1\" \/>\n\t<meta property=\"og:image:height\" content=\"1\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/webp\" \/>\n<meta name=\"author\" content=\"William Hayslett\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@PaladinRegistry\" \/>\n<meta name=\"twitter:site\" content=\"@PaladinRegistry\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"William Hayslett\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"11 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/\",\"name\":\"What is an Investment Policy Statement (IPS)\",\"isPartOf\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2021\/05\/policy.webp\",\"datePublished\":\"2021-05-13T11:19:29+00:00\",\"dateModified\":\"2024-08-28T09:51:59+00:00\",\"author\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/387697df93b42ff8cf0cfcbc2ecc4d76\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#primaryimage\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2021\/05\/policy.webp\",\"contentUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2021\/05\/policy.webp\",\"caption\":\"Investment Policy Statement\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/investment-policy-statement\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Investing\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/category\/investing\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"What is an Investment Policy Statement (IPS) and How Do You Write One?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/\",\"name\":\"Paladin Registry Blog\",\"description\":\"Helping You Make Better Financial Decisions\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.paladinregistry.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/387697df93b42ff8cf0cfcbc2ecc4d76\",\"name\":\"William Hayslett\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/staging-prblog.paladinregistry.com\/blog\/wp-content\/uploads\/2024\/08\/william-hayslett_avatar-96x96.jpg\",\"contentUrl\":\"https:\/\/staging-prblog.paladinregistry.com\/blog\/wp-content\/uploads\/2024\/08\/william-hayslett_avatar-96x96.jpg\",\"caption\":\"William Hayslett\"},\"description\":\"William is currently a member of the Respond.com Inc. 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