Investment Policy

Investment Policy

Any government rule or law that promotes or prevents investment from abroad in the national economy, such as currency restrictions, is known as a financial policy. 

What is an investment policy? 

An investment policy outlines the guidelines for spending public funds, defines the investment goals, inclinations or capacity for risk and limits the number of investments. It also includes details on how that investing programme is going to be managed and reviewed.  

The paper itself acts as a communication tool between the employees, elected authorities, consumers, rating firms, and holders of bonds. It may also be from any other parties involved in investment norms and objectives. The most crucial component of an official funds investments programme is a financial policy because it improves making choices and shows a dedication to the ethical management of public money.  

Contrarily, Investment Policy Statements constitute verbal agreements between a customer or owner and a portfolio manager. The overall guidelines and criteria for the folio are outlined in this paper. 

Understanding investment policy 

When managing their portfolios, investors can refer to an investment policy statement or the IPS for direction. Issues covered in an IPS include choices about how to allocate assets, customer willingness to take risks, influence, stability needs, and restrictions on investing in foreign securities. 

In addition to helping the client establish an investment plan for the future, a well-written investment policy statement offers an outline of the asset manager’s choices regarding investments. An IPS helps remind customers about the main aims and tactics of the assets, helping to prevent personal choices taken by the customer with reference to the investment. 

Working of an investment policy 

Investment declarations are occasionally, yet not always, used by accountants and investment advisors to document their financial plans with an investor in mind. It provides guidance for making informed judgements, serves as an orientation strategy for successful investing, and provides protection from potential errors or infractions. 

The investor’s duration and investment objectives are described in an IPS. For instance, an individual might state in their IPS declaration that they want to be able to retire when they are 60 years old and that under certain price hike assumptions, their portfolio of investments will provide US$65,000 per year in the present-day currency. 

Allocating assets goals are also specified in a well-designed IPS. The desired allocation among bond and stock markets. For example, is specified, and the desired allocation is further broken into smaller sub-asset lessons, including global equities by area. The goals ought to have an appropriate minimum and maximum variance that, if reached, will cause rebalancing of the investment. 

Importance of investment policy 

The following are some reasons why an investment portfolio is important:  

  • It offers insightful advice on asset creation and continuing maintenance. 
  • The following material aids investment consultants or managers of portfolios in maintaining their attention on the monetary objectives of the client. 
  • It aids portfolio management in avoiding aberrations brought on by the unstable financial situation. 
  • Consumers and managers of portfolios can prevent psychological prejudice by creating an IPS. 
  • Investors are always informed of the actions taken on behalf of them by their portfolio management. 
  • It aids in placing an investor’s expenditure forecast in perspective. 

Example of an investment policy 

Let’s assume that a person and his investment portfolio manager created an IPS. The agreement was very clear because the latter couldn’t engage in dangerous, speculated investments. After a while, a lot of rumours started to circulate about the potential legalisation of marijuana at the federal level. He requested that the portfolio advisor invest a sizeable amount of his capital in cannabis-related companies because he believes that the medical marijuana sector will soon surpass other industries. 

Nevertheless, the latter helped him realise that the IPS prevents him from adopting such risky investing judgements. The manager of the portfolio also added that while the customer’s action might increase short-term gains, its eventual effect on the worth of the portfolio may not be significant. The person would thus be unable to accomplish his objectives for the future as a result. 

Frequently Asked Questions

A client’s contracted chief expenditure office, or OCIO, executives, investment group, investment professionals, and custodians, among others, are listed along with their specific positions and duties in an investment policy that also details the customer’s financial targets and goals for investing. 


The purpose of all bank transactions is to generate revenue. Both the main and supplementary reserves are used to meet the bank’s solvency requirements. This helps alleviate society’s need for credit as well. These considerations include the need for the bank to provide quick funding.  

The financial institution uses the remaining funds for a long period of time to increase and optimise earning potential once the loan has been repaid. Every bank has a distinct investment plan that complies with business bank requirements. These investing tactics incorporate substantial earnings on unsold assets. 

  • A customer’s fund goals as well as data important to accomplishing those objectives are outlined in an investment strategy declaration, a piece of paper that is created in collaboration with the client by a manager of the portfolio. 
  • Purpose and objective, administration, investing, return and danger targets, and handling risks are the elements of a financial policy declaration. 
  • An IPS assists investors with portfolio decision-making and prevents customers from making emotional portfolio-related choices. 

The three basic and main components of the investment policies are: 

  • Stocks 
  • Cash equivalent 
  • Bonds

There are actually four basic types of assets, or investing categories, from which one may select. Each has unique qualities, dangers, and advantages. 

  • Investments in growth companies: These are better suited for individuals who can weather economic fluctuations. 
  • Shares: Shares are seen as a growth investment because, over the course of time, they can aid in increasing the worth of the initial investment. 
  • Property: Since the cost of homes and other real estate can increase significantly over the course of a short- to long-time timeframe, properties are also seen as an expanding investment. 
  • Defensive investments: They are thought to be more secure than growth assets since they are more concerned with reliably delivering income than with growth. 

Related Terms

    Read the Latest Market Journal

    Writing a Good Will: Avoiding Common Pitfalls (Part 2)

    Published on Jun 13, 2024 22 

    (This article doesn’t apply to foreigners nor our Muslim friends in Singapore.) Welcome to the...

    A Practitioner’s Perspective: Navigating Market Volatility, Uncertainty and Climate Change

    Published on Jun 12, 2024 70 

    In today’s dynamic financial landscape, investors face an array of challenges, including information overload, market...

    Investing in Tech Giants: Strategic Insights into Palantir, TSMC, and Microsoft

    Published on Jun 11, 2024 70 

    In the ever-evolving landscape of technology and data analytics, certain companies stand out for their...

    Weekly Updates 10/6/24 – 14/6/24

    Published on Jun 10, 2024 20 

    This weekly update is designed to help you stay informed and relate economic and company...

    Investing in Gold with Unit Trusts

    Published on Jun 7, 2024 119 

    When gold was first discovered about 4500 years ago, it was valued for its malleability...

    Weekly Updates 3/6/24 – 7/6/24

    Published on Jun 3, 2024 52 

    This weekly update is designed to help you stay informed and relate economic and company...

    World Environment Day – Investing in a greener future

    Published on May 31, 2024 120 

    What is it? World Environment Day is the UN’s largest global platform for environmental public...

    Water: Liquid investment opportunities

    Published on May 31, 2024 42 

    The Singapore International Water Week (SIWW) is a leading global platform for water industry professionals...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066