The investment policy statement is a:
The investment policy statement:
An investment policy statement is like a road map: It forces investors to understand their own needs and constraints and to articulate them within the construct of realistic goals. It not only helps investors understand the risks and costs of investing, but also guides the actions of portfolio managers.
The investment policy statement covers the types of risks the investor is willing to assume along with the investment goals and constraints. It should focus on the investor's short-and-long-term needs, familiarity with capital market history, and investor expectations and constraints. A typical investment policy statement includes the following elements:
Special Topic 1: Investment Strategy
An investment strategy is an approach to investment analysis and security selection. An investor needs to clearly formulate an investment strategy to impart organization and coherence to investment decisions and to guide those decisions toward the achievement of investment objectives.
Special Topic 2: The Ethical Responsibilities of Portfolio Managers
Ethical conduct is the foundation requirement for managing investment portfolios. A portfolio manager is in a position of trust and his conduct affects the well-being of clients and many other people. He must meet the highest standards of ethical conduct to truly serve his clients. For CFA Institute members, this position of trust is reflected in the Code of Ethics and Standards of Professional Conduct.
I. financial planner
There are two important reasons for constructing a policy statement: it helps the investor decide on realistic investment goals and it creates a standard by which the performance of the portfolio manager can be judged.
A. Existing knowledge that the investor has in investments and capital markets.
The policy statement does not worry about the emotional reactions or risks related to exceptional or strong performance (the investor should be so lucky!).
I. It is a road map.
All of them are characteristics of a policy statement.
A. outline either parts of or the overall investment strategy.
A. Most importantly, the role of portfolio manager is based on trust. The actions of a portfolio manager will have a profound impact on the financial well being of a client.
While having a reputation for ethical behavior is certainly a strong asset to have, it is by no means a tool meant to enlarge assets under management or to ensure that a manager stays in business. For example, even at the highest degree of ethical behavior, an investment manager may lose business or go out of business, if her style of investing remains out of favor for a prolonged period of time.
I. helps set realistic investment goals.
A. I, III & IV.
A policy statement is intended as a guide to the investment process, serving to identify and set realistic goals. This also creates the yardstick by which the portfolio manager can be judged when it comes to performance evaluation. Monitoring of the portfolio with respect to changing market conditions, however, is not a part of the policy statement.
A. the goals in the policy statement and the specified benchmark.
The portfolio manager is constrained to operate within the guidelines provided by the policy statement. Indeed, part of the policy statement is the specification of standards by which the portfolio manager's performance would be judged. Hence, the use of an arbitrary market index or any other standard which is not pre-specified is inappropriate.