Periods of market volatility such as we experienced in August and September often bring with them a chorus of advice, reminding investors to stick with their long-term strategy rather than to make rash, emotional decisions.  (In fact, I was one such chorister on this very blog.)  Now that markets have calmed somewhat in recent weeks, I thought this would be a good opportunity to revisit the process for laying out that long-term investment strategy in the first place, and the critical factors that should drive it.

Develop an Investment Policy

At Legacy Trust, we take a highly customized approach to developing investment plans.  Each individual or family that we work with has a unique set of financial circumstances and personal preferences that come into play, and what makes sense for one client may not be the right fit for another.  Accordingly, we work through a comprehensive discovery process with our clients to gather as much information as possible about their financial situation to guide us in making investment recommendations.

The process typically includes detailed discussion and data gathering on

  • goals and objectives
  • cash flow and liquidity needs
  • tax and legal considerations
  • tolerance of risk

The information gathered during the discovery process is summarized in a document called an Investment Policy Statement (IPS).  The IPS serves as a strategic roadmap for your portfolio by linking your personal financial situation to an appropriate investment implementation plan.  It establishes strategic asset allocation guidelines, identifies suitable investment classes and vehicles, and lays out risk and reward expectations that connect back to your specific needs.

Stay the Course

The key benefit to creating an IPS is that the process essentially forces you to think strategically about your needs, develop a plan, and put it down in writing, which can prove to be invaluable during times of stress.  It is only natural to want to react to market events as they occur, but referring back to your IPS can help you think through your actions in the context of your overall plan.  When the investment roller coaster has its ups and its downs, remember that your plan was put in place for a reason. More often than not, staying the course is the wisest choice. That being said, your IPS should be reviewed regularly, as your financial and personal goals do change over time.

If you have any questions about your Legacy Trust Investment Policy Statement, or if you are not yet a Legacy Trust client but are interested in learning more, please let us know.