Your investment policy statement is a document that describes your
personal investment strategy for your retirement investment plan. It
defines also your commitment to your investment plan.
Often your financial advisor would be able to draft this policy statement for you. It should define your investment goals and objectives. Presumably your financial advisor will be qualified and experienced and will ask the right questions to determine your preference on asset allocation, risk tolerance, and liquidity requirements.
However, it would be prudent to do a bit of homework yourself. To educate yourself as to the requirement and importance of a policy statement. This would enable you to retain control of your investment plan throughout the entire process.
Formulate your investment objective
You can have several goals. You can adjust your goals as the years go by. But your retirement savings goal must be very specific. Like: I want a total of $x million in retirement savings by my retirement date (specific date).
Craft a plan for each one of your goals
Identify the type of account or the type of investment. Specify the annual amount you'll contribute. Specify the asset spread required to reach your goal in time with the minimum of risk. If the risk is high, specify your fall back position in case things go wrong.
Specify your choice of investment for each plan by percentage
Rentable property, cash, Bonds, Stocks, or perhaps mutual funds or index funds. Be aware of the costs involved. Calculate the expected net return.
Reality is that most people do not have a formal investment policy statement. I don't think it is the end of the world, as long as you have a clear plan in mind and you are disciplined enough to stick to your plan. However, it is a good idea to document your plan and revisit and revise it annually.
The closer you get to retirement the more critical it becomes to be in control of your plan. On this Web site we discuss many issues around retirement planning. Do visit these pages. Test your policy statement or retirement plan with our recommended retirement income planners and calculators. Be sure. Eliminate uncertainty!
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