Explanation : The introduction describes the client and outlines what is covered in the
document. Often, the purpose and scope of the IPS is included as part of
introduction.
Explanation : Measuring willingness to take risk (risk tolerance, risk aversion) is an
exercise in applied psychology. Instruments attempting to measure risk
attitudes exist, but they are clearly less objective than measurements
of the ability to take risk. Ability to take risk is based on relatively
objective traits such as expected income, time horizon, and existing
wealth relative to liabilities.
Explanation : When a client has a restriction on trading, such as this obligation to
refrain from trading, the IPS “should note this constraint so that the
portfolio manager does not inadvertently trade the stock on the client‟s
behalf.”
Explanation : Appendices contain information on strategic (baseline) asset allocation and
permitted deviations from policy portfolio allocations, as well as how and
when the portfolio allocations should be rebalanced. Procedures to update
IPS are a major component of the IPS that is not a part of the appendices.