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What an Investment Policy Statement is
A plain-language guide to the IPS - the written document that records what your portfolio is for and the rules it answers to - and why a self-directed household needs one.
An Investment Policy Statement (IPS) is a short written document that records what your portfolio is for, how much risk it should take, and the rules you have set for yourself. Pensions, endowments, and advisors have used one for decades. A self-directed household needs the same thing, for the same reason: it turns a set of scattered intentions into a policy you can be held to - including by your future self.
Why it matters for a self-directed household
When you run your own money, the decisions arrive one at a time, usually under pressure: a market drop, a windfall, a hot tip, a year-end tax deadline. Without a written plan, each decision is made from scratch, in the mood of the moment. That is exactly when good investors make their worst moves.
The IPS is the answer you wrote down when you were calm. It is also the document that makes your reasoning legible to the people who may one day need it - a spouse who does not run the portfolio, a CPA, an attorney, or a trustee.
What is actually in it
A working IPS records a handful of things:
- Objectives - what the money is for and the time horizon.
- Risk capacity, tolerance, and need - three different questions most tools blur into one. (See risk capacity vs. tolerance vs. need.)
- Sell rules and never-sell rules - the discipline you want to hold, such as a single-position ceiling (a common default is trimming any position above 5% of the portfolio) or a list of holdings you will not sell regardless.
- Tax-location rules - which kinds of assets you prefer to hold in taxable, tax-deferred, and tax-free accounts.
The IPS does not pick securities or time the market. It sets the boundaries inside which those decisions get made.
How Ironlake treats it
In Ironlake the IPS is the governing document - the allocation dashboards, the rebalancing surface, and the tax tools all reference the rules you set in it. You build it through a guided wizard rather than a blank page, and finalized versions are immutable and effective-dated, so your policy history is preserved rather than overwritten.
- Try it without an account: the IPS Generator drafts a starting plan in a few minutes.
- Build the full version in-product: build your investment plan.
Honest limits
An IPS is only useful if you actually consult it. It is a policy, not a guarantee - markets will still test it. Its value is that when they do, you respond from a decision you already made rather than from fear or excitement. Ironlake records and checks against your rules; it never tells you what to buy or sell.