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Investing Specialists

How to Create an Investment Policy Statement

An IPS helps transition your investment collection to an investment plan.

University of Chicago professor Harold Pollack gained some well-deserved attention for his "financial advice on an index card" concept. His basic idea was that a successful financial plan doesn’t have to be--and in fact shouldn't be--overwrought. If you can't distill the basics onto a 4"x6" index card, you're probably overthinking it.

I urged investors to take up a similar challenge with their investment programs, and sketched out my own as part of this article. But investors can also benefit from fleshing out the parameters of their investment strategies a bit more by crafting investment policy statements. Financial advisors often prepare complicated investment policy statements for their clients, complete with appendixes, footnotes, and legal disclaimers. But yours needn't be overwrought.