DEFINITION of 'Uniform Prudent Investor Act - UPIA'

An updated trust investment law that reflects the changes that have occurred in investment practice since the late 1960s, specifically with regard to modern portfolio theory.

The Uniform Prudent Investor Act (UPIA) made five fundamental changes to the previous Prudent Investor Act standard. The most important change was that the standard of prudence would henceforth be applied to any investment in the context of the total portfolio, rather than to individual investments. Another key change was the extension of permission to the trustee to delegate investment management functions, subject to appropriate safeguards; such delegation was expressly forbidden by the former trust law.

BREAKING DOWN 'Uniform Prudent Investor Act - UPIA'

By taking the total portfolio approach and eliminating category restrictions on different types of investments, the UPIA fostered a greater degree of diversification in investment portfolios. It also made it possible for trustees to include in their portfolios investments such as derivatives, commodities and futures. While these investments individually have a relatively higher degree of risk, they could potentially reduce overall portfolio risk and boost returns when considered in a total portfolio context.

  1. Prudent Investment

    A prudent investment refers to the use of financial assets that ...
  2. Prudent Investor Rule

    A guideline that requires a fiduciary to invest trust assets ...
  3. Modern Portfolio Theory - MPT

    A theory on how risk-averse investors can construct portfolios ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  5. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  6. Portfolio Plan

    A portfolio plan is an investment strategy that guides the allocation ...
Related Articles
  1. Retirement

    How To Create an Effective Retirement Income Strategy

    We will design a portfolio that should balance the requirements of liberal income with sufficient liquidity to withstand down markets.
  2. Financial Advisor

    Series 66 Exam Prep: The Uniform Securities Act

    Before you take the series 66, you need to understand the Uniform Securities Act and the Blue Sky Laws.
  3. Managing Wealth

    Modern Portfolio Theory: Why It's Still Hip

    Investors still follow an old set of principles, known as modern portfolio theory (MPT), that reduce risk and increase returns through diversification.
  4. Investing

    The Workings of Equity Portfolio Management

    Portfolio management is a necessity, not an afterthought, in achieving analytical efficiency.
  5. Financial Advisor

    Concentrated Vs. Diversified Portfolios: Comparing the Pros and Cons

    Examine the relative advantages and disadvantages of utilizing either a concentrated or a diversified investment portfolio strategy.
  6. Retirement

    Estate Planning for Beginners: Part Three

    A primary purpose of most trusts is to provide a timetable for the distributions of assets where an outright distribution may not be warranted.
  7. Investing

    In Praise Of Portfolio Simplicity

    Find out how you can streamline your investments for greater returns.
  8. Managing Wealth

    Manage Investments And Modern Portfolio Theory

    Modern Portfolio Theory suggests a static allocation which could be detrimental in declining markets, making it necessary for continuous risk assessment. Downside risk protection may not be the ...
  9. Investing

    Major Blunders In Portfolio Construction

    Do you have the best mix of investments? Find out how to make sure by avoiding blunders.
  1. How is portfolio variance reduced in Modern Portfolio Theory?

    Learn about modern portfolio theory, specifically what it asserts about asset allocation and managing portfolio risk through ... Read Answer >>
  2. Is there a positive correlation between risk and return?

    Learn about the positive correlation between risk and the potential for return, and understand how risk is used to construct ... Read Answer >>
  3. My company is the trustee of our 401k plan (which has 112 participants). What are ...

    The answer may vary depending on the plan provider and the provisions of the plan document. For questions relating to a specific ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center