What is an Investment Policy Statement?
An Investment Policy Statement (“IPS”) outlines and prescribes a prudent and acceptable investment philosophy and process, which defines the investment management procedures and long-term goals of investors.
The Need for a Written Policy
The principal reason for developing a long-term written investment policy is to protect the portfolio from ad hoc revisions. The written investment policy will help maintain a long-term policy when short-term market movements may be distressing and the policy and/or strategies are in doubt.
The development of an investment policy follows the basic approach underlying financial planning. This includes:
The Stalwart Group's development of a client’s IPS incorporates, the “prudent person” standard which states that,
“Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investments, considering the probable income to be derived.”
The effect of a written policy is to increase the likelihood that the portfolio will be able to meet the financial needs of the client, the client’s family and future generations.
The first step of a well-drafted IPS is identifying of a prudent and sound investment program.
An IPS is not a contract. The Stalwart Group’s IPS is intended to be a summary of an investment philosophy and the procedures that provide guidance and to facilitate the prudent management of our Client’s investments. The investment policies described in an IPS should be dynamic. These policies should reflect the current status and philosophy regarding the investment of Client’s assets. The client and The Stalwart Group will review these policies periodically, but no less than annually. Revision may occur periodically to reflect any changes related to a client’s philosophy, goals, objectives and/or capital market dynamics.