An Investor’s Map To Chart Their Financial Destination
The written investment policy statement establishes an investment strategy to accomplish a financial goal based on current client assets earmarked for this intended purpose. The investment policy statement details the asset allocation model to determine the proportion of funds to be invested in each asset category within the universe of investment options including; stocks, bonds, real estate, alternatives and cash. The purpose of a personalized investment policy statement is to formalize the agreed which is the map to be used to govern the investment decision-making process over an extended period, throughout unforeseen market conditions and changing personal circumstances. Important factors that are considered in the formulation of a personalized investment policy statement include the following:
- Stated Goals and Objectives;
- Client Risk Tolerance;
- Investment Time Horizon; and
- Performance Measurement.
The investment policy statement has components which address various factors to be considered during the decision-making process designed to maintain the focus on the purpose and destination of your True North. The components of an investment policy statement include:
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The investment policy statement provides guideposts for the effective management of the investment strategy during periods which factors and assumptions may have changed including:
- Personal circumstance;
- Unforeseen risks;
- Interdependence of the recommendations made;
- Market forecasts and economic assumptions; and
- Changes in tax legislation;
The process of continuous and ongoing review of performance results compared to the financial goals will allow for any adjustments necessary to stay on course towards your True North.
