Investment Policy Statement (IPS): A Personal Investment Plan Template

An Investment Policy Statement (IPS) is a written guide to investment goals, time horizon, cash needs, risk, asset allocation, product selection, and review. It can support a more structured decision process but does not guarantee returns, prevent panic, or cap losses. Tailor it to your circumstances and document when and why it may change.

CFA Institute describes an IPS as a strategic guide to investment planning and implementation. Its guidance covers responsibilities, objectives, constraints, risk, and rebalancing, and stresses tailoring the document to the investor. Its examples are not allocations suitable for everyone.[2]

Start with goals and cash needs

Record each goal, currency, spending date, and target amount. Specify whether the target is in today’s money or future nominal money. Treat inflation and return assumptions as planning inputs, not promises.

Separate emergencies and near-term spending from long-term goals. Decide how much cash must be accessible without waiting for an investment sale. Do not automatically place the entire emergency reserve in a product requiring time to redeem.

If projected savings fall short, review contributions, spending, the target, or the deadline. Simply increasing an assumed return does not increase your ability to bear risk.

Separate willingness from ability to bear losses

Your imagined response to a market decline helps assess tolerance but cannot determine allocation on its own. Also examine income stability, debts, dependants, withdrawals, and other assets. CFA Institute includes risk tolerance and constraints such as liquidity and time horizon in IPS development.[2]

Writing down an acceptable loss does not stop losses at that level. A long horizon does not guarantee recovery either. Use adverse scenarios to assess whether essential needs would still be met.

Allocation and product criteria

Record target allocations and acceptable ranges. Ensure asset-class targets total 100% and state whether the emergency reserve is included or excluded. A generic conservative, moderate, or aggressive allocation is not automatically suitable.

List permitted products after checking:

• mandate, asset class, and concentration;
• total costs, not just the most prominently advertised fee;
• liquidity, maturity, sale conditions, and redemption terms;
• currency, tax, ownership structure, and jurisdiction;
• the identities and authorization of the manager, custodian, and seller.

Record the full product name, selection rationale, date of documents reviewed, and replacement conditions. This template recommends no fund, ETF, or app brand. Availability in an app does not establish suitability.

Make rebalancing rules precise

CFA Institute recommends documenting allocation deviation limits and the rebalancing process in the IPS.[2] Choose a review schedule or drift threshold while considering costs and taxes.

Mechanics example, not an allocation recommendation: a 60% equity target with a 5 percentage-point threshold gives review boundaries of 55% and 65%. This differs from a relative change of 5%. Specify whether reaching a boundary triggers a review or a trade, who approves it, and when it happens.

Consider directing new contributions to underweight assets before selling. Rebalancing restores the planned allocation; it does not guarantee higher returns.

A template to complete

This is a starting point, not a substitute for assessing personal circumstances. Add detail for complex goals or assets.

Follow the plan without ignoring its flaws

An example behavioral rule: “I will not trade solely because of a rumor or daily price movement. Before changing the plan, I will check cash needs, risk, and the reasons for the decision.”

Avoid absolute rules such as “never sell at a loss” or “change the plan only once a year.” Lost income, medical needs, mandate changes, costs, or product problems may warrant an earlier review. Record changes and their reasons so decisions can be examined later.

At routine reviews, check goal progress, contributions, costs, allocation drift, and risk suitability. Read asset allocation and the rebalancing guide for more detail.

References

[2] https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/position-paper/investment-policy-statement-individual-investors.pdf — CFA Institute — Elements of an Investment Policy Statement for Individual Investors (2010)

Educational information, not personal investment advice. An IPS does not guarantee capital or investment results.