5 Important Features of the Mutual Fund Prospectus

Reading a mutual fund prospectus is a very important part of choosing a mutual fund. It has everything that you need to know about a mutual fund, but can be long and confusing to read. Here are a few important features of the mutual fund prospectus.

1. Administration

The first part of the prospectus will cover the administration aspects of the mutual fund. It will give the name of the mutual fund and the company that runs it. This will help you make sure that you're looking at the right mutual fund. Be sure to compare the numbers of the fund because there can be funds with the same name, but may have a different number assigned to it.

2. Goals and Strategy

Another important part of the mutual fund prospectus is the goals and strategy section. This section notifies investors what type of strategy the mutual fund utilizes. For example, if it is primarily a mutual fund that invests in bonds, this is where you will find that information. It will also detail the exact strategy that is utilized. For example, this is where you will find out if your mutual fund values growth and tries to be aggressive or if it is a more passive form of investment. This is a very critical portion of the mutual fund prospectus for investors so that they can determine whether the mutual fund matches their investment style.

3. Fund Manager Info

The mutual fund prospectus will also let you know exactly who is running the fund. It will give you detailed information about the mutual fund managers and what their experiences. A mutual fund is only as good as the manager that runs it. Therefore, you want to pay special attention to this section. Consider doing your own additional research on the fund manager as well.

4. Charts and Graphs

Another section of the mutual fund prospectus includes charts and graphs. This will be a graphic representation of different things pertaining to the mutual fund, like the historical results. The graphs provide an easy-to-read format. Reviewing the historical reports of a mutual fund is critical for you invest. Ideally, you would like to see a steady growth pattern in a mutual fund. You want to know what type of return the fund has been averaging over the last several years. While past results are no indication of future results, you always feel better when you see a successful fund.

5. Fees

Another critical section of the mutual fund prospectus involves the fees associated with the mutual fund. As an investor, you need to pay special attention to the fees are involved. For every fee that you pay, that is less money that you get to keep from your return. Therefore, when shopping for a mutual fund you need to make sure that you choose a fund that has reasonable fees. Compare this mutual fund against several others and make sure that the fees are in line. Fees can vary by as much as 1 to 2% of your overall return.

blog comments powered by Disqus