Prudent Investor Rule (Guardianship) Law and Legal Definition

Prudent investor rule is a rule that requires a guardian to use prudence while investing the assets of a ward. It recognizes that certain nontraditional investments may actually be prudent. A guardian who does not use risk-reducing strategies may be penalized. A ward's assets must be diversified and a guardian has obligation to spread portfolio investments across asset classes and across global markets to enhance profit and reduce risk. Possibility of inflation must be considered as part of the investment strategy. The guardian may either use investment skill in managing assets or delegate investment management to another qualified person or agency.