How (and Why) to Read a Fund Prospectus

When you're in search of a definitive source of information for a particular mutual fund, all you need to do is take a look at a publication known as the fund's prospectus.


Each fund prospectus is issued by the fund provider and contains all the details investors need when choosing an investment. For example, prospectuses answer questions such as:


•In what types of securities does this fund invest?

•What is the fund's historical long-term rate of return?

•How much has the return fluctuated in the past?

•How does the fund's performance compare with that of the underlying market?

•Is the fund seeking income or capital growth?

•What risk factors are associated with the fund?

•What time frame is appropriate for an investor in this fund?

•What are the fees associated with this particular fund?


You can receive prospectuses free from mutual fund companies either online or by mail. You'll generally have no trouble finding the information you need -- prospectuses typically range from 10 to 20 or more pages and include a table of contents. To simplify the process of reviewing a prospectus, certain information is required to appear in the same place. For example, the performance table must appear at the beginning.


After reviewing a few prospectuses, you'll become accustomed to the language and be able to reduce the time it takes to find information and make a sound investment decision. Be sure to read the prospectus before investing in any fund.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 


© 2015 Wealth Management Systems Inc. All rights reserved.



Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail


The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.