What exactly is an Investment Policy Statement (IPS) and how can it help investors better manage their behavior and money? An IPS is a document that outlines the rules and guidelines you want your investments to follow. It’s typically created after you have completed and/or updated your financial plan. It’s helpful to have a good understanding of your appetite for risk, volatility, timelines, and liquidity needs before creating an IPS. Relevance is paramount.  

Planning first, portfolio second.

This may seem like an old school approach but having an understanding on what you want to do before, during, and after you invest makes a difference. It removes second guessing and doubts that typically creep in after financial decisions have been made. Yes, it’s possible to reduce the anxiousness that commonly arrives with investment decisions.

Can you invest without an IPS?

Sure, many investors do invest based on their gut, intuition, and beliefs as company prices contract and expand. The value of an IPS is to remove a lot of decision making from the investment selection process. You shouldn’t need to guess your way to the proper portfolio or react to what’s happening now. An IPS adds more structure to your decision-making process by specifically listing investments in their desired percentages.

How is an IPS created?

It begins with a broad understanding of what exactly you are hoping to achieve with your investments. “More wealth” is not a compelling or acceptable answer. This is going to require some dialogue with a professional who doesn’t have all the answers but instead has all the questions. Understanding your desired cash flows tomorrow and their relevance to keeping pace or exceeding inflation is a good start. So is quantifying what exactly it may take to retire successfully and stay successfully retired on your terms. 

Retirement means different things to different investors. Having an ongoing dialogue so you may right size your (and your spouse’s) definition is pivotal. A road map to where you want to travel reduces friction and allows you to answer better questions that matter. It’s not about quarterly performance, beating a benchmark, or annual returns. It’s more subtle and less obvious with softer questions. Here are several I share with my clients:

• How do you want to spend your time?
• What hobbies do you want to cultivate and explore?
• Where do you want to live and what’s the proximity to friends and family?
• Traveling aggressively under the age of 80 makes sense, so what’s your plan?
• How do you pass along your values to your adult children and grandchildren without spoiling them or lessening their grit?
• As you come to the end of your retirement, how do you want to be remembered?

It’s all about joy and fulfillment with your answers and with your life. Investments are simply a tool that may get you closer, or further away, to what you want. 

Share an example of how an IPS works.

Last April, there was a fair bit of negative volatility in the market as businesses and investors reacted to the tariff news. April 4, 2025, became the second largest one day point loss in S&P 500 history. Not to disappoint, April 9,^, 2025, produced the single largest intraday swing in the S&P 500 in history. Within a week, the S&P 500 index lost roughly 9% of its value. So, what’s an investor to do?

An IPS provides the desired percentage breakdown between all investments in your portfolio. The S&P 500 index is part of the picture, but not all of it. Small and mid-sized US companies need to be considered along with international companies in developed and emerging markets. Each asset class should be weighed appropriately based on what your financial plan calls for.

Investment percentages are naturally going to contract and expand throughout the year. However, in April of 2025 values contracted beyond typically acceptable limits. At the end of the quarter, June 2025, investment percentages continued to be off balance. The IPS automatically reset investment percentages back to where they needed to be. No investor input necessary.

More recently, in 2026, we continue to experience positive volatility in the S&P 500 index. It’s important to remember volatility moves in both directions, both up and down. As I’m writing this blog, the S&P 500 index is up roughly 10% year to date. Again, the IPS at the end of this quarter will evaluate what investment percentages need attention or may be left alone. 

So What?

The net result of implementing an IPS into your portfolio is that performance, investment selection, trading, and other economic or market news can be ignored. Investors can breathe a sigh of relief and instead put their energies into thinking more closely about what exactly they want to and through retirement. Start with refining your financial plan before checking to ensure that the IPS supports your wishes.  Portfolios should always report up to a financial plan that outlines your values. Planning first, portfolios second.