The Uniform Prudent Investor Act incorporates which of the following?

• A. Modern Portfolio Theory
• B. Random-Waltz Theory
• C. Odd-1st Ratio
• D. Efficient Market Hypothesis

Answer: (A)

Managing investments as a single portfolio, with diversification and a balance of risk and return, is the core idea. The Uniform Prudent Investor Act requires fiduciaries to consider objectives, time horizon, and risk tolerance, and to diversify to manage risk while pursuing reasonable returns. That portfolio-focused mindset is precisely what Modern Portfolio Theory formalizes: combining different assets so the overall risk is reduced and the portfolio’s expected return aligns with the chosen risk level.

The other theories aren’t the framework the act uses. Random-Waltz Theory and Odd-1st Ratio aren’t established fiduciary investment frameworks, and while the Efficient Market Hypothesis discusses how markets price securities, the act’s prudent-investor duties are grounded in the diversification and risk–return tradeoff emphasized by Modern Portfolio Theory.