Investment Policy Statement

An Investment Policy Statement (IPS) is the business plan for your investment strategy. Imagine a sea captain planning an ocean voyage without a clear route on how to reach their destination. Even if the seas are calm, and the crew coordinated, without a route planned in advance the ship could arrive in a non-desirable location. Investors using an IPS have a planned route on how to reach and to maintain their financial freedom.

Generally an Investment Policy Statement should cover the following topics:

Objectives:	What is the portfolio designed to accomplish?
Hoped for Returns:	What are the minimum or the range of returns required to meet your overall goals?
Time Horizon:	How long do you have to reach your stated objectives?  How long do you expect your objectives to remain consistent?
Risk Tolerance:	How much fluctuation in asset value can you emotionally handle?  How do you define risk – by overall portfolio, by a particular investment, by an asset class etc?
Cash Flow:	How will you consider your anticipated contributions or distributions from the investment portfolio? How tied to our economic ups and downs are those contributions or distributions?

At least annually the Investment Policy Statement is reviewed based on your current financial situation and expected financial outlook.