Prudent Investor Rule

The prudent investor rule generally provides that a fiduciary shall invest and manage property held on behalf of another on terms of trust as a prudent investor would, by considering the purposes, terms, and other circumstances of the trust and by pursuing an overall investment strategy reasonably suited to the trust. A person who holds property for the benefit of another is said to hold that property in trust and is known as a fiduciary. The terms prudent and discretion and intelligence were first applied to trustee decisions in an 1830 Massachusetts court case in which the court first established a “prudent man rule” by determining that trustees must take their investment cues from “men of prudence, discretion and intelligence.” This entry examines the history ...