Portfolio Planning Essentials

Portfolio planning equates to constructing a portfolio that is expected to meet investment objective. Therefore, Investment Policy Statements (IPS) are created, in which, they are a written documents governing processes. The IPS is the starting point and is constructed in conjunction the investors and investees. This is important because here information and facts are collected. And so are essential data points in constructing a potential portfolio.
 
Therefore, risk-return objectives need to be established. And, the utility function should be found to help identify risk attitudes towards the risk that can or cannot be showed. Therefore, whether it be relative or in absolute terms, they need to be realistic. Note the responsibility falls on the investee to counsel time value of money and inflationary measures, the macroeconomic and market environment, and general monetary goals.
 
Additionally, the discussion of liquidity and time horizons are indispensable to the sustainability of the portfolio. This will help answer the extent to what and how long investors can cover their positions and how long they can cover it for. Other miscellaneous, but still very important factors to consider are the regulatory environment, tax concerns, and special situations of the investor that may prohibit them from investing in certain asset classes (implicating potential individual and pooled investments).  And although there has been convergence lately, there is no one single standard format.
 
Baseline that can be used when constructing a plan:

1. Introduction
2. Statement of Purpose and Responsibilities
3. Procedures
4. Investment Objectives, Constraints, and Guidelines
5. Risk Implications and Objectives – quantifying risk objectives
6. Evaluation Performance
7. Appendices