Understanding your mission, strategic plan, and spending policy helps to formulate the right investment policy for your organization. An investment policy statement, known as an IPS, is a recommended best practice of the asset management industry to help guide your overall financial situation. It also provides numerous other advantages.
A policy statement helps establish:
These policies will be reviewed and revised periodically to reflect any changes related to you, your portfolio, or capital markets.
- Clear understanding between you and your advisor of investment goals, objectives, and management policies applicable to your investment portfolio
- Criteria for matching long-term objectives to an appropriate investment plan, which can be especially valuable during periods of market volatility when there may be a temptation to react to short-term factors
- Reasonable restrictions on your investment advisory services
- Foundation for a well-diversified asset mix that may generate long-term returns commensurate with a level of risk suitable to you
- Reasonable expectations, objectives, and guidelines by specifying the target asset allocation policy
- An investment structure for managing your portfolio that includes various asset classes, investment management styles, asset allocation, and acceptable ranges that, in total, are anticipated to produce an appropriate level of overall diversification and return over the investment time horizon