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.


Can you please explain why the answer is 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?