Readers know that I believe investors should create written Investment Policy Statements.

Having the Investment Policy Statement in writing helps with focus and self-discipline in both the creation and implementation of your investing plan.

And it is not just me that thinks written statements improve investor results. 

Written Investment Policy Statements Can Improve Portfolio Performance

A Written Plan Can Help Your Portfolio according to The Wall Street Journal. The article makes some excellent points (possibly because it shares many of my recommendations?) and is well worth the read.

Drafting a statement requires thinking about one’s portfolio as a whole and planning for the long term. Periodically reviewing the policy can help investors stay the course in challenging markets as well.

“Twenty years ago, if you asked a roomful of advisers how many of them worked with investment-policy statements, only a few hands would go up,” says Linda Lubitz Boone of Lubitz Financial Group, a registered investment adviser in Miami that manages about $140 million. “Ask the same question now, and all but a few hands go up.”

Advisors utilize Investment Policy Statements (IPS) in their practices. So should you in your self-directed personal portfolios.

Investor Profile

The linked article concentrates on the IPS and setting up your investment strategy. And the Morningstar template that is included in the article also focuses on the investing side.

But do not forget to include your Investor Profile.

Your Investor Profile is the key to a successful IPS. It takes into account such factors as your financial situation, investment objectives, personal constraints, time horizon, phase in your life cycle, and risk tolerance. These all determine what an appropriate asset allocation should be and help develop a prudent investment strategy.

As your Investor Profile changes over time, you need to review and amend your IPS on a periodic basis. I recommend that you review your IPS annually, as well as whenever a material event occurs in your life (new job, baby, illness, etc.).

Create and use a written IPS. If you require professional assistance, it is probably money well spent to set you on the right path.

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