What does the prudent investor rule focus on?

The prudent investor rule is centered on the conduct of the investor, emphasizing that trustees and fiduciaries must manage their investment decisions with the same care, skill, and caution that a reasonably prudent person would exercise when handling their own affairs. This principle highlights the importance of making informed and judicious investment choices, taking into account the specific needs and circumstances of the beneficiaries.

In practice, the prudent investor rule requires fiduciaries to diversify their investments to mitigate risks and avoid overly speculative or high-risk investments unless justified by the individual's investment strategy. The rule is fundamentally about how the investor behaves and the standards they must meet in their decision-making process, ensuring that they prioritize the beneficiaries’ best interests over personal gain or convenience.

Other options touch upon important aspects of investing – such as performance results, time horizons, and market volatility – but they are not the primary focus of the prudent investor rule, which is fundamentally about the conduct and due diligence exercised by the investor in managing the portfolio responsibly.