Mutual Fund Details Found in the Prospectus

There is more to this important document than objectives and expense information; here are other bits of information you will see in the prospectus.

The introduction

The introduction to the fund briefly describes the fund and some basic information about it. The introduction includes the address and various telephone numbers of the fund. The introduction also includes a disclaimer that tells you that the securities in the fund have neither been approved nor disapproved by the Securities and Exchange Commission (SEC). It also states that the SEC has not judged the accuracy or adequacy of the prospectus. The SEC requires that the disclaimer be included in the prospectus.

Performance and risk information

The prospectus may include information on the fund's performance. This includes gains or losses in its net asset value (the value of one share). It also includes information on its yields and distributions of capital gains. With this information, you can compare the fund to others like it.

The prospectus also discusses the risks involved in the types of securities in which it invests. Each security involved has its own discussion.

Earnings and tax information

There is a short explanation of the distribution of dividends and capital gains. It explains how often they are paid out. The section on taxes explains how your dividends and capital gains are taxed.

Some funds even include advice on how to invest in mutual funds, although they stop short of advertising themselves. By understanding the contents of a mutual fund prospectus, you will be better prepared to decipher your next prospectus and choose a mutual fund for yourself.