Creating an Investment Policy Statement

Do you have a written plan in place to guide your investment decisions?  If not, how do you know if your investment plan is on track to meet your financial life planning goals?

An excellent way to make sure that you follow an investment plan and have a measurement stick in place to track your progress is the setup an investment policy statement.  A solid investment plan requires proper direction and guidelines that will help any investor stay on track regardless of the situation.  Plans will frequently change or be altered over time, but if you have a plan in place from the beginning you can always figure out whether or not you are on track to meet your financial goals.  That is why you need to put your investment plan in writing and create an investment policy statement to guide your investment decisions.  An investment policy statement is a written document that defines how an investment portfolio should be managed.

An investment policy statement typically answers the following questions:

  • How much do you intend to invest each month?
  • How many years will you be investing?
  • What is the expected rate of return for the portfolio?
  • What is your target asset allocation mix?
  • What are your allowable assets?
  • Which no-load index mutual funds or ETFs fit into those asset categories?
  • What are the benchmarks for the portfolio (DJIA, S&P 500, FTSE, etc.)?
  • How often will you review your investment plan?
  • When will you rebalance your portfolio?

An investment policy statement is critical whether you are working with a trusted advisor or using a do it yourself approach to investing.  Next time you review your investment performance take a few moments to review your investment policy statement.  If you do not have a written set of guidelines for current and future investments you should go ahead and put your game plan in writing.

About the author

Scott M. Spann, CFP®, EA

Scott Spann CFP®, EA is a Fee Only financial life planner and the founder of LifeSpan Financial Planning, LLC located in Charleston, South Carolina. Scott has been providing financial planning advice for a diverse group of clients since 2000. He is a Fee-Only financial life planner practitioner with a strong orientation in areas of tax planning and financial life planning. Scott also specializes in investment planning, retirement planning, college planning, tax planning and incorporating life planning into the financial planning process. Scott is committed to the Fee-Only model of financial planning.

Scott is originally from Greenville, South Carolina and has called the Lowcountry his home since graduating from the College of Charleston in 1997. He began his financial planning career in 2000 after completing graduate studies at The Citadel (MA, 1999) in the field of psychology. This academic background helped shape his vision to help his clients make the smartest decisions possible with their money in a client-centered relationship. Scott completed his advanced financial planning studies at the College for Financial Planning.

Scott is a member of the Nation Association of Personal Financial Advisors (NAPFA), the Financial Planning Association (FPA), and the National Association of Enrolled Agents (NAEA). In addition to promoting Fee Only financial planning, Scott also devotes a significant amount of time promoting financial literacy and recently volunteered with Your Money Bus. He is a frequent guest on the Money Matters Radio Show on 94.3 WSC FM in Charleston, South Carolina where he provides financial planning advice to listeners. Scott also provides free financial counseling to military service members as part of the Department of Defense's Financial Readiness Program.

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