Under the prudent investor rule, which practice is least appropriate?

• A. Diversify and rebalance to meet objectives.
• B. Focus solely on high-risk investments to maximize returns.
• C. Align investments with the trust’s objectives.
• D. Monitor risk and adjust allocations.

Answer: (B)

The rule requires prudent judgment, diversification, and keeping the portfolio aligned with the trust’s objectives while actively monitoring risk. Focusing solely on high-risk investments to maximize returns runs counter to that approach because it prioritizes aggressive risk-taking over prudent risk management and diversification. By diversifying and rebalancing, the trustee spreads risk and helps the portfolio stay on track to meet objectives. Aligning investments with the trust’s objectives ensures the investments serve the trust’s purpose and risk tolerance. Monitoring risk and adjusting allocations keeps the portfolio from drifting into unacceptable risk levels. So the least appropriate practice is concentrating only on high-risk investments, which undermines prudent management.