Investment Goals

          As discussed before, it is important for everyone to establish financial goals. The financial goals that relate to investing are taken into account in the form of an Investment Policy Statement, or IPS. Investment Policy Statements are critical because they force you to analyze and review your entire investment strategy. Your IPS should be reviewed a minimum of once a year as well as every time you intend to alter your portfolio. Below is a generic IPS outline and useful reflection questions that may help you better understand your personal investment strategy.

EXECUTIVE SUMMARY

The IPS Executive Summary outlines your current investment situation as well as what you hope to achieve through investing.

Reflection Questions

  • What investments are currently included in my portfolio?
  • What is my portfolio worth today?
  • What is my investment time horizon?
  • How much risk am I currently willing to take?
  • What are my benchmarks for portfolio comparison?

INVESTMENT OBJECTIVES

The IPS Investment Objectives outline what you hope to achieve and what duration of time you have to achieve each objective.

Reflection Questions

  • What are my most significant financial goals?
  • What is my time horizon for achieving each goal?
  • How much must I contribute financially to achieving each one of these goals?

INVESTMENT PHILOSOPHY

The IPS Investment Philosophy outlines your fundamental beliefs as an investor and what strategy you intend to use to accomplish your goals.

Reflection Questions

  • How much risk am I willing to take in order to accomplish each goal?
  • What is my philosophy regarding diversification?
  • What is my philosophy regarding active vs. passive investing?
  • What is my philosophy regarding acceptable payment for financial advice?
  • What is my philosophy regarding tax shelters?
  • What is my criteria for selecting an investment company?
  • How should my investment portfolio be allocated to align with my investment philosophy?

INVESTMENT SELECTION

The IPS Investment Selection outlines the criteria you will use when determining which investments to select for your portfolio.

Reflection Questions

  • How well has this selection performed in the long term in comparison with its industry competitors and the benchmark?
  • Does the investment selection have a sustainable competitive advantage?
  • Have I properly analyzed and valued the investment selection using all relevant public information?
  • Have I completed all my homework regarding each particular investment selection?
  • Do my investment selections align with the suitable allocation outlined in my investment philosophy?

IPS REVIEW

The IPS Review outlines how your investment portfolio is performing relative to your investment goals.

Reflection Questions

  • Am I regularly monitoring the performance of my investment portfolio?
  • Does my investment portfolio efficiently maximize the potential reward I can receive given my level of tolerance for risk?
  • How is my investment portfolio performing relative to its benchmark?
  • Does my investment portfolio align with my current investment goals?