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What’s Your Policy?

Drew Harper, CFA, CFP®
May 15, 2018

I hope you have an investment policy.  I have a policy and so do our clients.  If you don’t have one, get one.  Your policy dictates why, how, where and when you invest.  It’s a simple idea: you wouldn’t build any type of structure or vehicle without consulting the proper engineer or architect.  Yet many investors and advisors begin investing without taking this critical step.  It’s obvious which investors don’t have a policy or an inadequate one - their actions reveal all!


To create a policy, begin with your goals, objectives and constraints.  For example:

Goal: save for your child’s education
Objective: provide 80% of total cost for four years
Constraints: time horizon of 18 years with the portfolio becoming more conservative as college approaches

A professional can add great value in the creation of your policy not only by listening and uncovering your goals, but also identifying the appropriate asset allocation given your goals and risk tolerance (which is both the ability and willingness to take risk).  In addition, the direction around taxes, portfolio rebalancing and performance measurement are crucial components.  The policy should also include you and your advisor’s role in the relationship and be reviewed on a regular basis.


Investment policies are designed to keep investors on track to meet their goals within the context of their constraints.  Yet, many will deviate or consistently change their policy to reflect how they feel about the market.  We strongly advise you to keep with your policy and only adjust when your goals, objectives or constraints change significantly.  Don’t sacrifice your well-designed policy when markets become volatile. An advisor can help keep you from taking actions you will regret.

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Any opinions are those of Drew Harper and not necessarily those of Raymond James. Diversification and asset allocation do not ensure a profit or protect against a loss. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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