Prudent-Person Rule

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DEFINITION

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

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.


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