How to Write an Investment Policy

Writing an investment policy for a business can play a significant role in determining the long term success of a business. When making an investment, several things should be considered, including the financial cost of the investment, how long to hold the investment and the anticipated return from the investment. Creating a successful investment policy for a company requires that investment plans are reviewed by several people in the company and that all potential risks are analyzed.

Instructions

1. Define which employees of a company are permitted to make investment decisions for the business in writing. This may sound elementary, but limiting the number of people that have this ability is essential to writing your business' investment strategy.

2. Determine the level of risk your business is willing to accept when making an investment. Require that any investment exceeding that level of risk is automatically rejected. This can help reduce the risk of the business losing money based on an individual's feelings instead of solid business investment approaches.

3. Require that a written investment proposal is submitted. This proposal should include the amount of money that will be invested, the amount of time the money will remain in the investment and the anticipated profit the investment will bring the business. If any of those three questions can not be answered to the satisfaction of upper management, the investment should be rejected.

4. Have a member of the finance department review the proposal. A second set of eyes to look over the investment proposal before it reaches upper management can catch embarrassing flaws in an investment plan, such as unconsidered risks or inaccurate calculations.

5. Require a member of upper management, preferably the chief financial officer or chief executive officer, to sign off on the proposed investment.

Tips & Warnings

• If working for a large company with multiple people originating investment plans, a plan should be submitted to the next level to review it without any indication of which individual created the investment plan. This will reduce the risk of decisions being made based on the people who made the plan instead of the feasibility of the plan itself.