August 10, 2021

What do successful investors have in common? They have a plan

The following article was written by Leith Wheeler VP & Portfolio Manager Leanne Scott and first published in CanadianFamilyOffices.com. It has been reprinted here with permission. You can read the original article and other thought leadership focused on family offices here.   

An investing roadmap can keep you on track, curb your worst impulses and help you buy low and sell high

Author: Leanne Scott, CFA

Imagine setting off on a journey with a destination in mind but no idea how you’re going to get there. You know that along the way there will be intermittent hurricanes and floods, sunshine and birdsong, but you won’t know when they will come – and every day you will face a fork in the road. If you choose the wrong method of transportation or head the wrong way, you may never reach your destination.

Without a compass, map or guide, what do you think your chances would be of arriving safely?

Investing without a plan looks a lot like this scenario. With no plan, you have no map to help you stick to your goals through difficult markets, no compass to monitor your progress, and no guide to help you adapt when things change in your life.

Investors – from large pension funds and endowments to successful individuals – have long solved this problem by developing a well-thought-out Investment Policy Statement (IPS) together with their counselors before embarking on their investing journey.

Essentially, an IPS provides a roadmap for building and managing your portfolio over time and typically lists investment return goals, time horizon, risk tolerance, liquidity (cash flow) needs, tax considerations, regulatory requirements and unique circumstances. These factors are relevant to all investors, wealthy or not.

After considering those objectives and constraints, the plan establishes target “asset allocation” ranges for your portfolio’s mix of stocks, bonds, private assets and the like. This practice ensures that when markets move these investments outside their ranges, portfolio rebalancing will be triggered. Just as importantly, though, it gives you guardrails that will protect you from making costly mistakes when things get tough.

Here are three happy consequences of having an IPS…

Leanne Scott

Principal, Portfolio Manager - Private Clients & Foundations