The Prudent Investor

This site provides information and techniques on investing prudently to earn a reasonable return and avoid major disasters like the dot.com and Enron meltdowns. To receive notice of updates to the site, subscribe here. (we do not sell, rent, or trade your email address) You will be asked to confirm your subscription by email as a protection from others subscribing you.

One of the services of The Prudent Investor will be an online course, Prudent Investing 101. It will cover principles for prudent investing as well as specifics on investing in stocks, bonds, mutual funds, etc. If you would like to be notified when the course becomes available, send an email to course request. (we do not sell, rent, or trade your email address)

What is a prudent investor? We might begin by relating it to the "prudent man rule" which is the established guide for trustees. One statement of the rule is: " the trustee may invest in a security if it is one that would be bought by a prudent man of discretion and intelligence, who is seeking a reasonable income and preservation of capital." [NYSE glossery] Would that define our prudent investor? Not completely - capital gains might also be a reasonable objective. It hints at what "prudent" means, but does not clearly define it. Here's a dictionary definition:

Prudent (Pru"dent)

1. Sagacious in adapting means to ends; circumspect in action, or in
determining any line of conduct; practically wise; judicious; careful;
discreet; sensible; -- opposed to rash; as, a prudent man; dictated or
directed by prudence or wise forethought; evincing prudence; as,
prudent behavior. [http://www.selfknowledge.com/76616.htm]

This adds some elements - wise, careful, sensible. "Directed by prudence" leads us to pursue further to a definition of prudence:

Main Entry: pru·dence
Pronunciation: 'prü-d&n(t)s

1 : the ability to govern and discipline oneself by the use of reason
2 : sagacity or shrewdness in the management of affairs
3 : skill and good judgment in the use of resources
4 : caution or circumspection as to danger or risk
[http://www.m-w.come/home/htm Merriam-Webster OnLine]

This brings out important characteristics of the prudent investor - especially caution as to risk. No investment is without risk. Prudent investors take into account the risk that is appropriate for them (generally moderate) and the risk attributes of investments they are considering.

Successful speculators may have some of the above characteristics, but take more risk in hopes of higher returns. Speculation may be a suitable approach for part of some people's funds, but not for most. Many people who call themselves investors are really gamblers. They're not careful or wise or discerning of risk. They buy on tips and rumors, buy overpriced stocks, etc. and generally lose in the longrun. The Prudent Investor will help you avoid gambling. To receive notice of updates to the site, send an email update request. (we do not sell, rent, or trade your email address)

The Prudent Investor is a service of Individual Investors Institute, a non-profit corporation dedicated to helping individuals succeed with their finances.
v1.3© 2002-06 A.D.Individual Investors Institute

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