A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Thursday, January 20, 2005

Why You Need an Investment Policy Statement

I'm sure you've probably heard the term "investment policy statement" before and wondered what it meant. An investment policy statement (IPS) is simply a written statement that lays out the do's and don'ts, chosen allocation, expected returns, and goals of your investment plan.

Why is this important to have? Because it is a great tool to help you stay focused when things are not going right. Perhaps the "market" is outperforming your asset allocation. Or, your brother-in-law is making money "hand-over-fist" in some little tech company. You may get the itch to do something you will regret later. Referring to your IPS will help you stay focused on your goal.

Here's a really cool tutorial on writing an IPS: Morningstar Investing Classroom

Until next time...