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...