Essential Component of an Investment Policy Statement

John is an individual investor looking to create a well-structured investment strategy. He has recently met with a financial advisor, who emphasized the importance of an Investment Policy Statement (IPS) in guiding John's investment decisions.

The advisor explained that an IPS outlines the investor's goals, investment horizon, risk tolerance, and specific strategies to achieve those goals. John is now trying to remember which component is essential for ensuring that the IPS aligns with his financial objectives and lifestyle.