Investment Policy Statements: Better Than A Financial PlanSubmitted by Castlebar Asset Management on November 26th, 2013
In the New York Times, there was an article highlighting the benefits of having an investment policy statement (IPS) instead of a financial plan for your investment portfolios. The IPS is a living document that lays out a client’s goals and objectives in a structured way. It also explains why an investment allocation is selected and presents tolerance ranges for each asset class. An IPS provides a narrative about why investment allocations are being made about your specific goals and objectives. At Castlebar, we write an IPS for each client because it serves as a roadmap for their portfolio.
There are many benefits in having an IPS but I believe its strength lies in the discipline it imposes on investors in times good times and bad. The article said:
The idea is to keep people from getting so bullish that they overcommit to a sector and lose when it inevitably falls, or so bearish that they sell their investments and go to cash.
This is a spot on statement about the strength of having an IPS. In times like 2009 when stocks looked like a hopeless investment it kept investors in the market, albeit at a reduced allocation. Conversely, it will prevent a portfolio from be over exposed when there is a bullish run. It will allow a client and advisor to avoid having emotion in the moment to making a poor snap decision.
If your current financial advisor is not creating an investment policy statement for your portfolio, please give me a call. I am happy to explain how an IPS may be better than a financial plan for your situation.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.