prudent person rule

Definition from Nolo’s Plain-English Law Dictionary

The requirement that a trustee, a city or county treasurer, an investment manager of pension funds, or any fiduciary (a trusted agent) must invest funds with discretion, care, and intelligence. Investments that are generally within the prudent person rule include solid "blue chip" securities, secured loans, federally guaranteed mortgages, treasury certificates, and other conservative investments providing a reasonable return. Some states have statutes that list the types of investments allowable under this rule.

Definition provided by Nolo’s Plain-English Law Dictionary.