As of January 1, failure to comply with the principle requirements of a new New Hampshire law could spell big trouble for anyone overseeing the money or investments of others. Many affected laypersons and professionals alike are completely unaware of the law, the principles behind it, and their potential exposure to personal liability. People with fiduciary responsibilities may be held liable if they cannot show that they meet these standards. Gone are the days when simply putting the money you manage for others in a CD will be considered a prudent approach under the law.
Most people buy or sell one investment at a time.
Modern Portfolio Theory, on the other hand, analyzes investments as a group. Modern Portfolio Theory is a quantitative method for substituting reason for emotion in the investment process. It won its founders the 1990 Nobel Prize in Economics, and it is widely used by some of the largest and most successful pension funds and portfolio managers. Identify specific investment objectives, such as producing a specified monthly income, producing a total rate of return that exceeds taxes and inflation by a specified amount, or constraining downside risk to a certain level, etc. Consider appropriate risk parameters, the types of investments already owned or available, the time horizon of the portfolio, and income or return objectives.