Question

question

There are two main factors to consider in constructing an investment policy. Explain the various components of these factors.

NB I need very good explanations

Answer 1

There are two main factors to consider in constructing an investment policy. Explain the various components of these factors:

Investment policies are concerned with an institution's goals, objectives, and guidelines for asset management, investment advisory contracting, fees, and utilization of consultants and other outside professionals.

the investment policy statement (IPS) communicates a client's investment goals and the strategies that will serve as guideposts for managing the portfolio. There are, however, the good, the bad, and the ugly among them.

Good investment policy statements:

• Provide appropriate guidance on portfolio construction and ongoing management

• Help maintain focus on the client's mandate and assist in avoiding deviations due to changing market conditions

• Serve as a critical tool in keeping clients focused on their stated objectives

Ideally, an effective IPS incorporates two important and interrelated components: an outline of the client's quantitative and qualitative objectives and a set of metrics for the accurate evaluation of the portfolio's construct, including appropriate return and risk measures.

Practicing outcome-based investing with an IPS built around a single metric that incorporates several aspects of risk, instead of a single aspect of risk, may afford clients the ability to more effectively advocate for themselves while also having a deeper understanding of the risk they may be taking on.