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Canadian Investor Policy Statements (IPS) : A Quick Overview



 

A Canadian Investor Policy Statement (IPS) is a document that outlines an investor's financial goals, risk profile, investment objectives, and guidelines for managing their investment portfolio. Here's a simplified explanation:

 

Financial Goals:

The IPS identifies the investor's financial goals, such as saving for retirement, funding education expenses, buying a home, or achieving specific wealth targets.

Goals are typically categorized as short-term, medium-term, and long-term objectives, each with its own time horizon and priority level.

 

Risk Profile:

The IPS assesses the investor's risk profile , or their willingness and ability to tolerate fluctuations or even losses in investment returns.

Risk profile is influenced by factors such as investment knowledge, time horizon, financial capacity, and emotional comfort with market volatility.

 

Investment Objectives:

The IPS defines the investor's investment objectives, including return expectations, income requirements, and capital preservation goals.

Objectives may vary based on the investor's stage of life, financial circumstances, and personal preferences.

 

Asset Allocation:

The IPS establishes guidelines for asset allocation, or how the investor's portfolio will be divided among different asset classes such as stocks, bonds, cash, and alternative investments.

Asset allocation is based on the investor's risk  profile, investment objectives, and time horizon, and is designed to achieve a balance between risk and return.

 

Investment Policy:

The IPS outlines the investor's investment policy, including guidelines for selecting and managing investments, diversification strategies, and rebalancing criteria.

It may specify investment preferences, such as active or passive management, ethical or socially responsible investing criteria, or restrictions on certain types of investments.

 

Monitoring and Review:

The IPS includes procedures for monitoring and reviewing the investor's portfolio to ensure it remains aligned with their goals, objectives, and risk profile.

It may establish criteria for evaluating investment performance, assessing changes in the investor's financial circumstances, and making adjustments to the investment strategy as needed.

 

Documentation and Communication:

The IPS serves as a formal document that documents the investor's financial goals, risk profile, and investment strategy.

It provides a framework for communication between the investor and their financial advisor or investment manager, helping to ensure that investment decisions are consistent with the investor's objectives and preferences.

 

In summary, a Canadian Investor Policy Statement (IPS) is a personalized document that outlines an investor's financial goals, risk profile, investment objectives, and guidelines for managing their investment portfolio. It serves as a roadmap for making investment decisions and helps to ensure that the investor's portfolio is aligned with their long-term financial needs and objectives.

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