Investment
policy statement

An investment policy statement (IPS) is a written framework that sets out how you intend to invest, why, and under what rules. It defines your time horizon, target return, acceptable risk, asset allocation bounds, and rebalancing approach. It is not a portfolio—different portfolios can satisfy the same framework—but it is what you check any portfolio you hold against.

To defer to a calmer version of yourself during a market crash. Markets will give you reasons to deviate from a long-term plan; an IPS is what you check before you do. The policies you commit to in writing become the boundary inside which any portfolio operates, and the framework outlives any particular portfolio.

Anyone running their own portfolio for a meaningful goal. Retail investors with a brokerage account, self-directed retirement savers, DIY family-office investors, and trustees managing money for others. If you have a portfolio and no written rules for it, an IPS is the first piece of process that makes the portfolio repeatable.

At least annually as a calendar review, and after any material life change: income, dependents, time horizon, a large windfall, retirement. The framework should be stable across cycles; the portfolio inside it rebalances more often. Tactical deviations from the policy are tracked separately so you can see whether they actually paid off.

For individual self-directed investors it is a personal commitment, not a legal contract. For institutional or fiduciary contexts (pension funds, endowments, trusts) an IPS often carries legal weight under fiduciary duty law. Either way, the discipline comes from writing it down and reading it before deviating.

Asset allocation is what you hold; the IPS is the rule set that governs what you hold. The IPS specifies risk tolerance, target return, allowed instruments, rebalancing triggers, and abandonment thresholds; the asset allocation is the resulting portfolio at any point in time. Two investors with the same IPS may hold different allocations; the IPS outlives any particular allocation.