Glossary
Investment Policy Statement
An investment policy statement (IPS) is a written document that sets out how a portfolio will be managed — its goals, target asset allocation, rebalancing rules, and the criteria for selecting and replacing investments.
For individuals, an IPS records the plan agreed with an adviser: the stock/bond split, when to rebalance, and what circumstances would justify changes. For retirement plan sponsors and trustees, it documents the process by which the fund menu is chosen and monitored.
Why it matters in practice
The document's real function is behavioral and legal. For an individual, it is the pre-commitment consulted in a panic — the answer written in calm weather to questions asked in a storm. For an ERISA fiduciary, a followed IPS is core evidence of the prudent process the law requires; an ignored one is worse than none, which is why the discipline of following it matters as much as writing it.
Related terms: Asset Allocation · Rebalancing · Risk Tolerance · Fiduciary · Plan Sponsor