Investment Policy Statements – Why are they important?

On today’s episode, Richard is his own guest once more for a discussion about investment policy statements (IPS). In addition to explaining just what an IPS is, what’s in it, and why it’s so important, Richard also reviews the performance of the S&P/TSX so far this year, and the dangers of making investment decisions based upon emotion rather that evidence. This may be a short podcast, but you can rest assured that it is an extremely important one, particularly given these unprecedented times.

Download the full transcript here

Highlights:

The S&P/TSX is only 10% away from breaking even for the year.
An investment policy statement (IPS) is a set of rules that will keep you grounded in order for you to reach and achieve your investment goals.
The four steps in building an investment policy statement are establishing your goals, determining the amount of time to reach these goals, deciding on your risk tolerance, and selecting the investments that will help you achieve your goals.
The IPS will most likely be challenged during market extremes.

Quotes:

“If you had stayed the course, your investment portfolio today would be very close to breaking
even.”

“I suggest strongly that we start with a set of policies or investment rules. Otherwise, I’m afraid
we will be investing blindly.”

“By comparing their investment returns to the appropriate benchmark, they may in fact learn
that they are actually progressing as planned in the investment policy statement, and there was
no need to worry, and definitely there was no need to change course.”