Prudent-Person Rule

What Does Prudent-Person Rule Mean?
A legal maxim restricting the discretion in a client's account to investments that a prudent person seeking reasonable income and preservation of capital might buy for his or her own portfolio. Also called the Prudent Man Rule.

Investopedia explains Prudent-Person Rule
This rule is intended to protect investors using the services of an investment advisor from shady, risky, or otherwise poor investments, such as penny stocks.

Related Terms

Advisor
Blue Chip Stock
Broker
Fixed Income
Government Security
Penny Stock
Preservation of Capital
Treasury Bond
More Related Terms

Related Links

The Lowdown On Savings Bonds - They may not be sexy, but bonds offer undeniable benefits to investors.
The Importance Of Dividends - Seven words that are music to investors' ears? "The dividend check is in the mail."
The Lowdown On Penny Stocks - Think penny stocks will make you rich? If you don't understand the risks, you could end up penniless.

Get a new investing term in your inbox each day!

- join our Term of the Day!