Which statement about the prudent investor rule is most accurate?

Which statement about the prudent investor rule is most accurate?

• A. The standard of prudence is applied to each individual investment
• B. The standard is applied to the total portfolio and includes diversification
• C. The rule does not allow delegation of investment management
• D. The rule requires a conservative asset allocation in all circumstances

Answer: (B)

The main idea is that prudent investing looks at the portfolio as a whole, not at each security in isolation. Under this rule, a fiduciary must act with prudence by considering the trust’s overall objectives, risk tolerance, time horizon, and liquidity needs, and by diversifying investments to reduce risk. That makes the statement that the standard is applied to the total portfolio and includes diversification the best answer. It also aligns with the ability to delegate investment management to qualified professionals while maintaining prudent oversight. The rule does not require every investment to be conservative in all situations, and it does allow delegation under prudent methods, so those other points aren’t correct.

The main idea is that prudent investing looks at the portfolio as a whole, not at each security in isolation. Under this rule, a fiduciary must act with prudence by considering the trust’s overall objectives, risk tolerance, time horizon, and liquidity needs, and by diversifying investments to reduce risk. That makes the statement that the standard is applied to the total portfolio and includes diversification the best answer. It also aligns with the ability to delegate investment management to qualified professionals while maintaining prudent oversight. The rule does not require every investment to be conservative in all situations, and it does allow delegation under prudent methods, so those other points aren’t correct.