Investment Policy Statement (IPS)
The written plan for how a portfolio will be invested and monitored.
What is Investment Policy Statement (IPS)?
Sets out objectives, risk tolerance, time horizon, constraints (liquidity, taxes, legal), asset allocation targets, and the criteria for selecting, monitoring, and replacing investments. For plan fiduciaries it is key evidence of a prudent process.
Investment Policy Statement (IPS): a worked example
An IPS requires replacing any fund that trails its benchmark by more than 1% a year over three years.
More terms in Retirement Plans, Accounts & Trading
IRA Rollovers vs. Transfers
60-day rollovers are limited to one a year; direct transfers are unlimited.
10% Early Withdrawal Penalty & Exceptions
Distributions before 59 1/2 cost 10% extra, unless an exception applies.
Solo 401(k)
A 401(k) for a self-employed owner with no employees other than a spouse.
Defined Benefit Plan
A pension promising a specific benefit; the employer bears the investment risk.
Defined Contribution Plan
An individual account plan whose payout depends on contributions and returns.
403(b) Plan
A salary-deferral plan for public schools and 501(c)(3) nonprofits.
457 Plan
Deferred compensation for state and local government employees.
SIMPLE IRA
A low-cost plan for employers with 100 or fewer employees.
All Retirement Plans, Accounts & Trading terms · Full glossary