The Key Components of an Investment Policy Statement (IPS)
Explore the essential elements of your Investment Policy Statement (IPS) and how each part helps ensure your portfolio remains personalized, disciplined, and aligned with your financial plan.
Your Investment Policy Statement (IPS) is the written foundation for your portfolio at Optimize. It is designed to reflect your personal goals, your comfort with risk, and your financial situation, providing a clear set of guidelines that both you and Optimize can follow when managing your investments.
Each section of the IPS plays an important role in keeping your portfolio structured, intentional, and responsive to your evolving life. Here’s a closer look at the key components and how they support your plan.
1. Your Investment Objectives
This section outlines what you want your investments to achieve, whether that is long-term growth, income generation, capital preservation, or a combination.
By defining your objectives clearly, we ensure that your portfolio is designed to serve the outcomes that matter most to you, not generic market benchmarks.
2. Your Risk Profile
Your risk profile reflects both your emotional comfort with market ups and downs and your financial capacity to take risk. This section ensures that your portfolio’s level of risk matches what you are prepared for—helping you stay disciplined through market cycles without feeling overexposed or uncomfortable.
3. Time Horizon and Liquidity Needs
This section defines how long you plan to invest before needing access to your funds, and any anticipated cash flow requirements along the way.
This helps us ensure your portfolio strikes the right balance between growth potential and accessibility, aligning with your financial life and plans.
4. Target Asset Allocation
Your target asset allocation outlines the mix of equities, fixed income, alternative investments, and cash that should make up your portfolio, based on your objectives, risk profile, and time horizon.
This is the core structure of your portfolio, providing diversification and balance to support your long-term success.
5. Rebalancing Guidelines
Rebalancing guidelines specify how and when your portfolio should be adjusted back to its target allocation.
This helps manage risk over time, ensuring that your portfolio does not drift outside of your comfort zone as markets move.
6. Constraints, Preferences, and Special Considerations
This section captures any personal preferences, ethical considerations, or restrictions that should be respected when managing your portfolio.
\Whether it is avoiding certain industries, ensuring tax efficiency, or accounting for concentrated holdings, this section helps ensure your portfolio is tailored to your unique values and situation.
7. Review and Update Process
Finally, the IPS includes a commitment to regularly review and update the document as your life evolves, ensuring that your portfolio remains relevant, intentional, and connected to your financial plan over time.