How to Read a Mutual Fund Prospectus
The mutual fund prospectus contains valuable information that you should by all means get familiar with before you invest. From the prospectus you can find out what the fund's investment objectives or goals are, what the investment strategies for their achievement are, the fund's fees and expenses, risk level, and past performance.
Here is what you read in a mutual fund prospectus:
The date the prospectus was issued.
Mutual fund prospectuses should be updated at least once a year so you should make sure you get the latest version.
A file number.
The file number starts with 811 and is located on the back page of the prospectus. The file number can be used to find documents that have been filed with the SEC - all the fund's filings in the EDGAR database are done with this number.
A risk/return table and a bar chart.
The bar chart shows the annual total returns for the last decade. In case the fund is less than 10 years old, the bar will show the annual total returns for the life of the fund. The table sets forth returns for the previous 1-, 5-, and 10-year periods both before and after taxes.
Have in mind that the bar chart and table of a multi-class fund will usually show only performance data and returns for one class.
The fee table will show you the mutual fund's anticipated annual fees and expenses, including annual fund operating expenses and shareholder fees.
Information for shareholders.
In this section you will find information on how purchase and redeem the fund's shares, what the tax consequences of this are, what the minimum initial or subsequent purchase amounts are (if there are such), and whether a minimum account balance should be maintained.
Located typically near the back of the prospectus, this section can show you the fund's financial performance for each of the recent 5 years. Look here if you are interested in the net asset values, total returns, portfolio turnover rate, expenses to average net assets ratio, net income to average net assets ratio, etc.
|Rate this article : Low||High|
- Mutual Fund Definition and Mutual Fund Basics
- Investment Portfolio Diversification
- Benefits of Mutual Funds
- Definition of Net Asset Value - NAV
- Places to Buy Mutual Funds
- Mutual Fund Selling Time
- Closed-end Fund Definition
- Investment Returns Pitfalls
- Mutual Fund Types
- Bond Fund Pitfalls
- Important and Useless Financial Paperwork
- Bear Sterns Late Mutual Fund Trading Scandal
- US Patriot Act Section 326 Impacts
- SEC Mutual Fund Board Regulations
- Mutual Fund Board of Directors Composition
- Mutual Fund Account Opening Documentation
- Papers to Examine - Trade Confirmations, Prospectuses, Account Statements
- Listen to Your Mutual Fund Broker
- Complaint Letters to the Mutual Fund Managers
- Act upon Mutual Fund Problems
- Mutual Fund Managers Potential Assessment Part 1
- Mutual Fund Manager Potential Assessment Part 2
- Top Fears to Overcome and Start Investing in Mutual Funds
- Best Books on Investment Psychology
- Investment Psychology Explained
- How to Invest in Mutual Funds
- Guide to Mutual Funds
- Unemployment Insurance Benefits Eligibility
- Student Loan Debt Management
- Balancing a Checkbook - Lesson Plan
- Mutual Fund Expense Ratio Considerations
- High Turnover Ratios Warnings
- Index Mutual Funds
- Mutual Fund Performance Evaluation Benchmarks
- How to Do an Investment Research
- Investing in Education
- Mutual Fund Categories
- Top Financial CEO Salaries
- Implication of Mutual Fund Mergers
- Why Should I Invest in a Mutual Fund
- Get to Know the Mutual Fund You Invest In
- Advantages of Mutual Funds
- Compound Annual Growth Rate
- Mutual Fund Breakpoints
- Mutual Fund Performance Measures
- Investment Risk Tolerance and Types of Risk
- Investing for Women
- Where to Buy Mutual Funds