Question about Investment Policy Statement

A well-constructed Investment Policy Statement is intended to prevent all of the following problems except: A. An investor loses 20% of the value of his portfolio on 1 year B. The portfolio manager invests the bulk of a 65 year old’s 401 K in options C. The investor sues because his portfolio of bonds is not performing as well as the SP500 D. A new portfolio manager takes over and liquidates the risky portfolio until he has an opportunity to meet with the investor.

A

Can you please explain why the answer is A?

A

well nobody can stop you from losing 20% if you are invested that would be good for clients :slight_smile: it just makes sure that the investments are apropriate to the clients profile

A. Investor can loose despite a good policy statement if he/she agrees to take higher risk

A because IPS could have high risk tolerance

A. Because all the other options left talks about directions a portfolio can take while A is about an outcome inspite of IPS.

A - who says you cant lose money if you bought what is appropriate for the client?