Building a portfolio
Investment policy statement
Also called IPS
A written document setting out what you are investing for, how, and what would make you change.
How it works
An IPS records the objective, the horizon, the target allocation, the rebalancing rule, what you will and will not own, and the conditions under which the plan changes.
Its whole function is to be written when you are calm and read when you are not. A rule decided in advance is the only defence against a decision made at the bottom of a decline.
Related terms
- Strategic asset allocationThe long-term target mix you intend to hold through cycles, set from your goals rather than from market views.
- Rebalancing bandHow far a holding is allowed to drift from its target before you act.
- Risk toleranceHow much decline you can live through without changing your plan.
- Behaviour gapThe difference between what a fund returned and what its investors actually earned in it.
Mentioned in
More in Building a portfolio
- Modern portfolio theory
- Home bias
- Rebalancing
- Glide path
- Fund overlap
- Efficient frontier
- Safe withdrawal rate
- Effective number of holdings
All 20 Building a portfolio terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.