reasonable investor
Reasonable investor is a legal standard in securities law used to determine the materiality of information in a security transaction. Similar to the reasonable person standard, the reasonable investor is not explicitly defined by courts or statutes. A reasonable investor refers to a rational person with an average level of financial literacy and a basic understanding of economic activities. Reasonable investors do not have the specialized knowledge of financial professionals in capital markets, but they do understand there are always some uncertainties in market predictions. Therefore, whether information is material when buying or selling securities depends on what a reasonable investor, not the actual investors involved, would find important.
[Last reviewed in April of 2026 by the Wex Definitions Team]
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