Your Investment Policy Statement

The plain answer

An investment policy statement, or IPS, is a short written plan for your investments. It says what the money is for, what you will own, how you will add money, and what would justify a change.

You write it in a calm week so you do not rewrite it in a loud week.

How it actually works

A useful IPS covers:

• The goal and the earliest date you might need a large withdrawal
• The mix of stocks, bonds, and cash you will hold
• The funds or account types that implement that mix
• The contribution schedule
• When you rebalance, which means bringing the mix back to target
• What does not count as a reason to change (a headline, a hot tip, a bad quarter)

It is not a prediction. It is a constraint on your future self.

What this means for you

Keep it to one or two pages. Store it where you will see it when you log into the brokerage. Review it after a job change, a new dependent, or a planned date, not after every market move.

If you cannot explain the plan in a few sentences, it is too complex. Simplify until you can. See Why Simplicity Wins.

Common mistakes

Writing a novel of tactics and never opening it again.

Changing the IPS because prices moved. Change it when your life moved.

Copying someone else’s allocation without matching their timeline and job risk.

Related pages

• What You Can and Cannot Control
• When Not to Optimize
• The Order of Operations for Your Money