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An Example of an Investment Policy Statement

When befalling a new destination, it helps to map out the directions. Once you arrive, it’s a good time to make an activity plan. If you’re going to a state reservation for a hike, you’ll want to determine how to get there and which trail to follow at the park.

Similar to an expedition, an Investment Policy Asseveration (IPS) is a guide to your financial future.

What Is an Investment Policy Statement (IPS)?

An IPS is the map, activity schedule and outcome document between a pecuniary advisor and client. The first section of the statement includes the client’s broad investing goals and objectives. The next component argues the path that the advisor, in collaboration with the client, follows to reach a set of goals.

The details include topics such as asset allocation, gamble tolerance, and financial goals.

An Example of an IPS

Take a look at the following fictitious example of an Investment Policy Statement.

Investor Firstly Advisory, LLC Investment Policy Statement for Juan Martinez

Executive Summary:

Juan Martinez, Individual Investor, age 55

Portfolio: Singular, Taxable

State: California

Tax ID: xxx-xx-xxxx

Current Assets: $500,000

Return Goal: 6%

One year loss limit (worst covering scenario): 15-18%


  • Long-term growth and capital preservation
  • Risk profile: Conservative
  • Time horizon: Major than 5 years
  • Short-term liquidity needs: None
  • Long-term rate of return expectation: 6% (based upon recorded rates of return)

Financial Advisor Duties and Responsibilities:

  • Fiduciary, non-biased third-party charged with helping shoppers meet long-term financial goals.
  • Confer with client to create asset allocation.
  • Select assets in accordance with asset allocation present sufficient diversification of risk and returns.
  • Control and report all investment costs.
  • Monitor all investment options and portfolio custodian. (Custodian is important for safekeeping of client’s assets)
  • Value all portfolio holdings on a regular basis.
  • Provide monthly reports that classify securities, cash flow, income, and the monthly change in value.

Portfolio Selection Guidelines:

In general, long entitle investment performance is determined by asset performance. Historically, stock assets offer higher rates of return along with monstrous volatility. Fixed assets generally yield lower rates of return, lower correlation with equities and youthful risk. Diversification across asset geography and size is recommended.

Based on the client’s conservative risk profile, the portfolio asset allocation determination be 60% stock assets and 40% fixed.

The individual composition of holdings will be selected from index stores and exchange-traded funds from the following asset classes:


  • U.S.
  • High-Dividend
  • Value
  • Small Cap
  • International, including developed and expose markets


Rebalancing of Asset Allocation:

According to data from Vanguard, there is no universally agreed upon asset allocation. Neither is there evidence to recommend rebalancing more frequently than annually. Thus, the portfolio will be rebalanced annually, while endeavouring to minimize the tax consequences of asset sales.

Performance Monitoring:

Each index mutual fund or exchange-traded funds’ come backs will be compared with their related benchmark. Any deviation from that benchmark will be evaluated and discussed annually. The holdings desire also be compared with peer group funds. 

The parameters for selling a fund due to poor performance include one year of horrific than 1% deviation from the benchmark and/or falling in the bottom half of the cohort fund group.

Costs purpose be monitored annually to ensure that total costs do not surpass 1% of all investable assets.

Annually, at a minimum, the complete portfolio will be monitored to consider whether initial goals are in place or have changed. Performance and fees last wishes as also be included in this conference. Together, Mr. Martinez and the advisor will determine the future portfolio direction.

The Essentially Line

An investment policy statement is personal and individualized for the circumstances of the advisor’s client. The previous example is one type of IPS. Each fiscal advisory firm will have a version of their own statement.

Finally, large investment brokerage companies also be enduring investment policy statements for their individual mutual funds and/or client groups. The investment policy statement foods both the client and advisor on the same investing page and holds the advisor accountable to a certain standard.

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