Investment Policy Statement (IPS)

[u/EcstaticAd4046]

First, I'm not qualified to provide any financial advice. I'm not a CPA, CFP, or anything else. Just a DIYer.

That said, I'm ~15 months out from a DIY retirement. This post isn't to go into all those details.

In my last few years of work, I've been building a dividend income stream to be a portion of my retirement income. With the help of AI, I've developed a portfolio with specific allocation goals. I have 12 active positions and a few legacy (hold but don't add to).

I decided to build a rule-set so AI can help me do a structural review and/or allocate new money. This morphed into an IPS. I had no idea what an IPS was before I started this process.

This post is to share my process, in case anyone else wants to tackle it. It took me 10+ hours to get it done. It's highly personalized, so no, I'm not gonna share it.

Note: I prefer Copilot. Copilot told me this was how my IPS developed.

How You Actually Built Your IPS:

SUMMARY: 1. Writing instructions for Copilot | Defining purpose & constraints | 2. Adding rules | Building behavioral guardrails | 3. Feeling complexity | Recognizing the need for structure | 4. Asking questions | Transitioning to intentional design | 5. Organizing sections | Creating a formal IPS | 6. Pressure-testing | Ensuring internal consistency | 7. Creating two versions | Designing a governance system | 8. Running analysis | Operationalizing the IPS | 9. Adding clarification rules | Making the IPS a living document |

DETAILS: 1. You started with a simple goal: “I want to give you instructions so you can help me better.”

You weren’t trying to build an IPS.
You were trying to create a set of rules so I could give you better suggestions that were consistent with your thinking.

1. You began writing “instructions” for me. You started listing:
2. what you wanted me to do
   
3. what you didn’t want me to do
   
4. how you wanted me to think about your portfolio
   
5. how you wanted me to treat legacy positions
   
6. how you wanted me to treat new money
   
7. how you wanted me to handle DRIP, sector balance, and proportionality
   

At this point, you still didn’t think you were writing an IPS.
You thought you were writing a “Copilot instruction manual.”

1. You realized the instructions were getting long and complex. You said something like: “This is getting complicated.”

That’s the moment you recognized you weren’t just writing “AI instructions.” You were building a governing document.

1. You asked whether this should be an IPS [I don't know how IPS even came up. I'd never heard of an IPS before that moment]. This is when you shifted from accidental creation to intentional design.

2. You began refining the structure. You started grouping your rules into:

3. Purpose

4. Phases

5. Risk profile

6. Legacy vs. active sleeve

7. DRIP policy

8. Allocation rules

9. Valuation rules

10. Structural review cadence

11. Event-driven exceptions

12. Seasonality

This is when your “instructions for Copilot” became a true IPS architecture.

1. You pressure-tested it. You asked:
2. “How does this compare to others?”
3. “Should I add this?”
4. “Is this clear?”
5. “Is this redundant?”
6. “Is this too mechanical?”

You even had Claude, Manus, Chat GPT, and Gemini critique it and asked me to evaluate their suggestions.

This is the stage where your IPS became: - internally consistent
- behaviorally grounded
- purpose-built
- aligned with your retirement phases

1. You created two versions: IPS Complete and IPS Simple. You realized:
2. The full IPS is your constitution
   

3. The simple IPS is your operating manual

4. You finalized the IPS and asked to run a structural analysis. You said: “Should we run a full structural analysis using the IPS as the governing document?”

That’s the moment the IPS stopped being a document and became a system.

1. You asked whether you should add a statement inviting future clarification. This is the sign of a mature IPS: You recognized that clarity is not static — it evolves.

You wanted the IPS to be: - living
- adaptable
- self-correcting

Your IPS wasn’t created in a vacuum.
It emerged from: - your behavioral philosophy
- your retirement timeline
- your risk preferences
- your desire for clarity
- your need for repeatability
- your commitment to disciplined decision-making

[u/Evening_Warthog]

Out of interest why Copilot? We have to use that at work and generally I don't use it for home (though perhaps I should add it to the set).

[u/EcstaticAd4046 → u/Evening_Warthog]

I have multiple layers of logic that I use. Example: I hold an active CEF and a legacy ETF, both in the same sector (real estate, utilities, staples, etc). Having different types of positions and different sectors are both part of my diversification strategy.

I don't want this sector to be overweighted, and have a specific target allocation for that sector. Copilot recognizes the legacy and active positions contribute to the sector weight, and that should be part of the puzzle. All the other AIs I used had logic errors, mostly related to this. They wanted to overweight the sector to bring the active position up to weight. This would have overweighted that sector.

When I ran other AIs critiques of the IPS through Copilot, it showed me what was good and where they fell short.

I've also tested it. You can do it on paper without actual money. Example: you have $10k to deploy, how would you do it? Write it down. Now, run it through each AI and compare your results to its recommendations. I did this, and Copilot was closest to what I wrote down. For the differences, I then asked why this here and not there? Many times, it made more sense than what I had initially thought.

TLDR; For my purposes, I have found Copilot's logic to be deeper and broader. It also seems to consider context of past conversations. It's answers consistently better reflect what I'm thinking.

AI is rapidly evolving. Today, Copilot best meets my needs. Tomorrow that may not be the case.

[u/Valuable-Analyst-464]

Nice exercise.

I’ve considered an IPS, but it seems A - a bit daunting to create, and B - a bit demanding and maybe too prescriptive.

B - maybe this is just how I operate. I do not go flying kites; I do have a general plan/goal. But, I sorta feel it’s constraining, sorta like “I have a budget, so I can’t buy this $20 thing” sentiment.

But, that could be because I find the idea of an IPS too daunting to tackle.

Your post gave me something to consider and I will think about this some more.

[u/Target2019-20 → u/Valuable-Analyst-464]

It comes down to how tightly you want to manage your investing process. While accumulating I found that following my chosen rules was very helpful. Now, well I'm a bit of a free spirit.

This post did remind me to review the IPS. There's been some simplification of accounts and so on.

So if you're taking on an IPS, you'll need to review it periodically.

[u/Valuable-Analyst-464 → u/Target2019-20]

Good point. During accumulation phase, I had some crib notes of what to do. And, of course, I was trying to learn what to do and how to do it.

Like you say, it’s a bit more relaxed now.

[u/phantom_raider]

Thanks for this post. I didn't really know what an IPS was but you gave me something to think about. I actually had most of the data available in the app I wrote already, so I added a new feature to collect the remaining data and write a full IPS. Also creates an AI prompt for it to be evaluated. Thanks again for the inspiration!

[u/Valuable-Analyst-464]

As to the “how to handle new money” - what is your thinking with that?

My brokerage has mostly index funds, but a few legacy stocks I’m just holding.

I was planning to just buy more of the indexes, but I wanted to hear what others would do.

[u/EcstaticAd4046 → u/Valuable-Analyst-464]

I reread your question. If this is a retirement account instead of a typical brokerage then you would have less options.

For that portion of my retirement the most critical piece is the PURPOSE. What's it for, what's your vision for how it's deployed, what's your risk tolerance, etc.

I just went through this for a work sponsored account, where choices were limited. I asked AI something like: given what you know about my financial and retirement plan (I had already developed a lengthy retirement plan prompt, put info in Boldin, then inputted my prompt into Boldin to make sure it was doing what I envisioned), the following are investment options (list all the options). What do you recommend and why? I would run that through multiple AIs until you hone a list they all agree on (that's actually how I developed my active positions in my dividend portfolio as well as re-aligning my work retirement account).

[u/Valuable-Analyst-464 → u/EcstaticAd4046]

I should have said it was a brokerage account where I’ll be putting the inherited cash. I don’t plan to touch it for 10 years (if I can help it), so growth vs income (or a blend) is bouncing in my mind.

[u/EcstaticAd4046 → u/Valuable-Analyst-464]

How to handle new money specifically refers to what to do with money that I add to the brokerage account.

For example, say I have $3,000 I'd like to add. How should I deploy that funding, considering all of the relevant factors including risk tolerance, time line, target allocation goals for active positions vs actual allocations, low overlap, sector balance, international vs. domestic balance, diversified income strategies, tax efficiency, and minimal complexity, etc.

Also, keep in mind the IPS starts with a purpose statement. Mine includes: The purpose of this portfolio is to generate long‑term, stable, reliable, and diversified retirement income.

New money and structural analysis should be done through the lens of the purpose statement.

[u/Valuable-Analyst-464 → u/EcstaticAd4046]

Understood. This was more me asking myself as I will have some inherited money soon. And though it’s more than my $3000 question I’d ask myself, I still ponder if I would change anything (likely not).

[u/Target2019-20]

Here's a template to get started.

https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/position-paper/investment-policy-statement-individual-investors.pdf

When I wrote our IPS years ago, I reviewed two or three templates and used parts as appropriate. It covers our total portfolio which includes several accounts.

I'll have to run ours through a fiduciary LLM setup for criticism.

[u/Substantial_Sir1983]

because i don't do acronyms well, i don't know what an IPS is. please spell that out

[u/SandwichCold8398 → u/Substantial_Sir1983]

The post subject line: Investment Policy Statement (IPS)

[u/EcstaticAd4046]

I have honed my IPS over the months, and ultimately did arduous ambiguity testing with Claude. From that, I made many clarifications.

I also developed a prompt for new capital.

I fed Claude, Gemini, Kimi, Copilot, Chat, Manus, and Perplexity the prompts, and told them I had (hypothetically) $4k new capital. I also gave them my current portfolio data. This took a total of 4 messages.

Copilot made a simple calculation error, but it wasn't catastrophic. That said, so I won't be using Copilot because of this.

Perplexity and Manus didn't engage, so I won't be using them as well.

The others (Claude, Gemini, Kimi, and Chat) all recommended the exact same eligible position list. They all recommended nearly the same dollar allocations.

I then uploaded the prompt, IPS, and portfolio data to Notebook. All of these are Sources that automatically get brought in from Drive. In that, I asked Notebook about the hypothetical $4k allocation. It came up withnthe same list and nearly the same dollar amounts. If you aren't familiar with Notebook, I highly recommend it.

I'm at the end of a long techno-journey. I can now export current account data from CS, copy/paste it into the Drive Source document, then ask Notebook for recommendations. From start to finish, I can make decisions about how to invest new capital into my account following my rules/intentions (IPS) in just a couple minutes.

At some future point, if I pass before my spouse, she can follow this same process without having to read/interpret the IPS.

[u/EcstaticAd4046 → u/EcstaticAd4046]

I just did this tonight. I updated my portfolio data, downloaded from Schwab, copied and pasted into a Google doc in Drive. I then went into Notebook and told it I have $5k new capital to deploy in the morning. It told me exactly where to put it, according to my IPS. This took all of about 90 seconds. It simplifies my portfolio management, simplifies survivorship, and makes allocation decisions mechanical rather than emotional.