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An Investment Policy Statement (IPS) is an essential document for all investors, regardless of the size of their portfolios. It outlines the portfolio’s objectives, along with the strategies, methods and parameters the financial advisor, portfolio manager or other decision makers are given to manage the portfolio. It also covers the risk tolerance, asset allocation and liquidity needs of the client. The IPS can be tailored to the needs, goals and values of each individual investor and provides both the investor and the manager with an easily understood framework of guidelines and expectations.
The purpose of an investment policy statement is to help maintain and protect a client’s wealth. A portfolio’s objectives should be clearly defined in the IPS so that it can be managed in a way that strongly represents the values of the investor. From this document flows a plan detailing how to achieve the desired objectives, such as the desired allocation of assets and the level of risk factors that will be accepted and managed. In other words, an IPS defines the criteria under which a manager must act and be held responsible for in order to meet the client’s goals.
An Investment Policy Statement offers flexibility and control over a portfolio, helping to ensure that an investor’s goals are prudently and securely managed. By establishing an IPS, a manager stays apprised of current conditions, market trends and individual activities that affect the portfolio, allowing for real-time revisions to be made if necessary. It also provides a more efficient communication line between the advisor, client and decision makers, giving them all a better understanding of what policies, procedures and actions are being employed and why.
The IPS contains specific policies regarding when and how a manager should make investments and states the type of reporting that should be done in order to track the portfolio’s progress. Having a thorough Investment Policy Statement allows an investor to gain a more in-depth understanding of their portfolio and can help the manager and investor develop an effective strategy to reach their desired objectives. In conclusion, while the IPS may not be a guarantee of a successful portfolio, it certainly facilitates it.
The purpose of an investment policy statement is to help maintain and protect a client’s wealth. A portfolio’s objectives should be clearly defined in the IPS so that it can be managed in a way that strongly represents the values of the investor. From this document flows a plan detailing how to achieve the desired objectives, such as the desired allocation of assets and the level of risk factors that will be accepted and managed. In other words, an IPS defines the criteria under which a manager must act and be held responsible for in order to meet the client’s goals.
An Investment Policy Statement offers flexibility and control over a portfolio, helping to ensure that an investor’s goals are prudently and securely managed. By establishing an IPS, a manager stays apprised of current conditions, market trends and individual activities that affect the portfolio, allowing for real-time revisions to be made if necessary. It also provides a more efficient communication line between the advisor, client and decision makers, giving them all a better understanding of what policies, procedures and actions are being employed and why.
The IPS contains specific policies regarding when and how a manager should make investments and states the type of reporting that should be done in order to track the portfolio’s progress. Having a thorough Investment Policy Statement allows an investor to gain a more in-depth understanding of their portfolio and can help the manager and investor develop an effective strategy to reach their desired objectives. In conclusion, while the IPS may not be a guarantee of a successful portfolio, it certainly facilitates it.