You may not have billions, but can still invest like the funds that do

OTTAWA -- Big pension funds use investment policy statements to help guide their portfolios, but even though you aren't managing billions, advisers say you probably should use one too.

See Full Article

A formal investment policy statement is not a financial plan, but should be complementary to one.

Ilana Schonwetter, an investment adviser at Blue Shore Financial in North Vancouver, B.C., says an investment policy statement should outline your overall objectives, while a financial plan handles the details of achieving those goals.

"To me it makes sure that my clients actually understand everything that we have discussed," Schonwetter says.

"This is the point at which you can reconfirm that you're both on the same page as far as some very key important factors that will help your relationship move forward."

A formal investment policy should lay out why you are investing and your expected time horizon.

It should provide guidance about how money will be invested, including what kinds of investments it will hold and outline what mix of stocks and bonds you are comfortable with.

It should reflect any discussions you have had with your adviser about the level of risk you are willing to take and what may or may not be a suitable investment.

Are you comfortable with investing in individual stocks or would you rather hold mutual funds? Are junk bonds OK or do you want to only hold investment-grade debt? The policy should set out where your money can go.

A policy should also outline your expectations from your adviser and what you are going to pay for their services. Things like how often you expect to meet with your adviser and what kind of communications you expect to receive should be set out.

An investment policy can also be where you identify any restrictions on investments you may want to include, such as socially responsible investment principals.

"The investment policy statement to me can go beyond just the objective and the goal. It can reflect the client's personal values and make sure that we are really tapping into what is important to that client," Schonwetter says.

Sylvain Brisebrois, a portfolio manager and regional manager at BMO Nesbitt Burns, said an investment policy can be used to help keep you on track when markets are volatile.

"When the markets are going quickly to the upside and we become a little bit braver in terms of our allowable risk tolerance, this is a document we can refer to to make sure we don't deviate from our longer-term understanding," he said.

"The flip side also true. When the markets are difficult, sometimes we want to refer back to the IPS."

Brisebrois compared a formal policy with having a road map to help guide your investing.

"If you take off without having really planned where you're heading, sometimes you need to readjust and it could slow you down," he said.

He says he reviews the investment policy with his clients annually, but changes only need to be made when the circumstances require them.

Brisebrois says investment policies aren't an absolute necessity, but even investors with small portfolios should consider them.

"The bigger the portfolio, the more customized it might become. Much like a will," he said.

"As the needs of an investment plan become a little bit more detailed, then the IPS takes on a little bit more structure."



Advertisements

Latest Economic News

  • U.S. economy expanded at weakest pace in 3 years in first quarter of 2017

    Economic CTV News
    WASHINGTON -- The U.S. economy turned in the weakest performance in three years in the January-March quarter as consumers sharply slowed their spending. The result fell far short of President Donald Trump's ambitious growth targets and underscores the challenges of accelerating economic expansion. Source
  • Montreal landlord fined after tenants rent out condo illegally

    Economic CTV News
    A Montreal landlord says he’s been fined more than $1,200 because the tenant living in his condo listed the space on Airbnb without his knowledge. Gerry Galiatsatos said his unit came with tenants when he purchased it less than a year ago. Source
  • Swedish cows in a great moooo-d as summer pastures open

    Economic CTV News
    DROTTNINGHOLM, Sweden -- Despite a cold wind and chilling temperatures, spring has come to Sweden. At least, spring for the milk cows. In an annual event that warms hearts across the country, "koslapp" -- the cow release -- has become a popular family outing for urban residents. Source
  • Trump to spend Day 100 in office talking trade

    Economic CTV News
    WASHINGTON -- U.S. President Donald Trump is marking his 100th day in office by talking tough on trade.Trump's first 100: Day-by-day highlights Analysis: We've read all President Trump's tweets, so you don't have to The White House says the president will sign an executive order Saturday that will direct his Commerce Department and the U.S. Source
  • Trump says he's brought 'profound change' to Washington

    Economic CTV News
    WASHINGTON -- U.S. President Donald Trump on Saturday marked his 100th day in office by saying he had brought "profound change" to Washington and reaffirming that "my only allegiance" is to those he governs.Trump's first 100: Day-by-day highlights Analysis: We've read all President Trump's tweets, so you don't have to During an evening trip to Pennsylvania, one of the states that propelled his unlikely election victory, Trump planned to sign an executive order directing the Commerce Department…
  • 'Not for the faint of heart': Why getting a marijuana producer licence is a long shot

    Economic CBC News
    The regulatory gates to Canada's legal marijuana regime are open, but only a crack. Health Canada has received 1,630 applications for licences to grow or sell medical cannabis as of March 31. Only 43 licences have been approved so far, representing just 2.6 per cent of the total applications. Source
  • Trump will zero in on trade agreements during 100th day

    Economic CTV News
    WASHINGTON -- U.S. President Donald Trump will spend his 100th day in office talking tough on trade in one of the states that delivered his unlikely win. The president is expected to sign an executive order Saturday that will direct his Commerce Department and the U.S. Source
  • B.C. leader could drag Canada into unwanted battle with U.S. on softwood: expert

    Economic CTV News
    BURNABY, B.C. -- A vow by British Columbia's Liberal leader to fight American tariffs on softwood lumber may force the federal government to wage an unwanted battle with the United States, an international trade expert says. Source
  • Hacker threatens to release stolen copies of Netflix series

    Economic CTV News
    SAN FRANCISCO -- A hacker claims to have stolen the upcoming season of Netflix's hit series "Orange Is The New Black," and is asking for an unspecified ransom to not release the entire fifth season online. Source
  • Hacker releases stolen copies of Netflix series

    Economic CTV News
    A hacker claims to have followed through on a threat to release several episodes from the upcoming season of Netflix's hit series "Orange Is The New Black." The hacker, which goes by the name The Dark Overlord, announced the move on Twitter early Saturday. Source