Investment policy statement (IPS)

Definition

Investment policy statement (IPS) in plain English

An investment policy statement is basically the game plan an investor writes down before putting money to work — a rulebook you agree to with yourself (or your financial advisor) up front. It spells out your goals (like growing savings for retirement), your limits and rules (how much risk you can stomach, when you'll need the cash, any things you won't invest in), and your general strategy. Having it in writing keeps you from making panicky, emotional decisions when markets get scary, kind of like a coach's plan that keeps the team disciplined instead of just reacting to every play.

Related Principles of Finance terms

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• American option
• Arbitrage pricing theory (APT)
• Asset-backed security (ABS)
• Basis risk
• Bid-ask spread
• Bookrunner
• Carhart four-factor model
• Clientele effect
• Collateralized debt obligation (CDO)