Investment Policy Statement (IPS) Defined + Free Sample

Today we are going to tell you everything you need to know about Investment Policy Statements (IPS). We are also sharing free resources and templates to help you take quick action.
Investment Policy Statement (IPS) Defined + Free Sample

The Investment Policy Statement (IPS) is a document that dictates how you invest your money.

If you’re working with a financial planner, the Investment Policy Statement (IPS) will also dictate how they invest your money for you.

While he/she will make smart investment decisions on your behalf, you will likely want to have some say in how your money is invested.

With a simple Investment Policy Statement in place, your financial planner can’t go rogue with your money.

The IPS tells them how, when, and where to invest so you can reach your financial goals.

Think the IPS has to be complicated? Think again!

  1. Investment Portfolio Review Checklist (Free PDF)
  2. Consumers: Download Sample Investment Policy Statement (Printable PDF)
  3. Institutions & Organizations: Download Sample Investment Policy Statement (Printable PDF)

You might also enjoy learning more about Investment Policy Statements by listening to the podcast episode I recorded on the topic:

Information Included on an Investment Policy Statement

While Investment Policy Statements can look different based on the client, their portfolio, and their investing goals, details found on a simple IPS typically include:

  • Your investment objective. Do you want growth, income, or safety?
  • Your time horizon. How long do you need your money to be invested?
  • Your income needs. Do you want to reinvest and rebalance or take regular withdrawals?
  • Your desired asset allocation. How much of your money do you want in each asset class (i.e. stocks, bonds, real estate, cash)?
  • Your need for liquidity. How much cash do you need in reserves to fund near-term expenses?
  • Your investment philosophy. Do you want your investments actively managed or passively managed? Are their certain asset classes or stocks you would like to stay away from (e.g. tobacco companies)?

Remember, perfect is the enemy of good. Having an IPS is better than not having one at all.

Start simple and know this a fluid document that will change over time.

At a minimum, you should review your Investment Policy Statement every year and ask yourself the following questions:

  1. Have there been any meaningful changes to my investment goals since the IPS was last updated?
  2. Do I plan to make significant changes to my asset allocation in the next 12 months?
  3. Does my current investment portfolio match up with the asset allocation documented in the Investment Policy Statement?

The state of the economy or the stock market should not influence a change to your IPS. The document should only change if your financial needs and goals have changed.

Do Individual Investors Need an Investment Policy Statement (IPS)?

If you’re a do-it-yourself investor (i.e. you don’t have a financial advisor), an IPS is likely even more important.

Self-directed investors are often more emotionally attached to their investments.

For that reason, it’s critical they have a set of guiding principles to dictate how and where their money is invested.

One reason Investment Policy Statements are so valuable is because these documents help investors stay the course.

And, staying the course with your investing plan may be more important than you think.

(Mostly because a wealth of academic research has shown that staying the course is what creates a successful investing experience.)

“Forecasts are difficult to make—particularly those about the future.” – Burton G. Malkiel, A Random Walk Down Wall Street

If you learn anything from this article, please learn this: avoiding dramatic changes to your portfolio is critical to investment success. 

An IPS can do just this: help you stick with your plan.

Figure out an investment plan that matches your financial needs and goals. Then, stick with it for the long run so you can reap the rewards.

How Can the IPS Help You Better Invest Your Money?

At the end of the day, an Investment Policy Statement is most valuable in times of stock market uncertainty and investment fads.

For example, consider how valuable it would have been to have an IPS during the late ’90s internet bubble.

An investor without an Investment Policy Statement could have easily been tempted to put heir retirement nest egg in soon-to-be-worthless internet stocks.

Investment Policy Statement

An Investment Policy Statement (IPS) can help protect you from chasing fads, like the dot-com bubble.

However, the investor with an IPS would likely be prohibited from putting all their eggs in that now-defunct basket.


Because their IPS would have been created to reduce unnecessary risks and maintain a diversified portfolio of stocks and bonds.

Their IPS would have had rules in place to prohibit making concentrated investments.

Investment Policy Statement Objectives

The objectives outlined in an Investment Policy Statement (IPS) should prohibit concentrated investments and help to reduce risk.

The Investment Policy Statement (IPS) is Critical to Financial Success

The job of a CERTIFIED FINANCIAL PLANNERTM Professional is to ensure the financial success of their clients.

Maintaining a portfolio that is in line with a client’s goals and risk tolerance does just that.

The Investment Policy Statement (IPS) just takes everything a step further:

It forces investors – and their trusted advisors – to put their investment needs and goals in writing.

If you’re someone who wants to stay the course so you can meet your long-term financial goals, it’s critical to create an IPS.

And remember, this is important whether you work with a financial planner or not.

An IPS will serve as the voice of reason when you’re tempted to invest in risky, currently-trending (read: bubble) investments.

If you’re able to create this document to rely on its wisdom for the long-term, the odds are in your favor that you will have more money saved when you reach retirement.