In portfolio management, there is a rule known as the “Prudent Man” rule. This rule dictates that an investment professional who is entrusted to invest a trust fund on his clients’ behalf has to act as what a prudent man would have done if there were no specific investment instructions. This post is not about the “Prudent Man” rule, but is a light-hearted post introducing a new “Prudent” rule, which is the “Prudent Family” rule. Note that although the Prudent Family also has a Prudent Man as a family member, he is not the same man as in the “Prudent Man” rule. For the rest of this post, “Prudent Man” refers to the Prudent Man in the Prudent Family, not the Prudent Man in the “Prudent Man” rule.

The “Prudent Family” rule provides a light-hearted way of looking at portfolio allocation among various asset classes. By following the “Prudent …