Investing Advice

The Mutual Fund Prospectus

Every mutual fund publishes a booklet that tells everything you need to know about it. This is called a prospectus, and is supposed to be read before your money is accepted by the fund company. The Investment Act of 1940 says that the prospectus must fully disclose all expenses, which include sales costs, management fees, and 12b-1 “marketing” fees.

Also included is an explanation of management's objectives and style of investing. All policies and practices are disclosed, including how to buy and sell your shares, and any redemption fees that may be charged. The prospectus's chart of the performance of the fund over various time periods such as 1, 3, 5, and 10 years shows you how well the fund has done in the past.

When you ask for a fund's prospectus, request the Profile Prospectus too. It's usually about 4 pages and puts all the important facts into a quick and easy read. Also ask for the fund's Statement of Additional Information, which will have greater detail than the prospectus, and the fund's Annual and Semi-annual Reports. They should also be more current in respect to the fund's holdings along with an interview with the fund's manager.

The investment strategy is directed by the mutual fund manager, or sometimes a management team. When you invest in a mutual fund you are buying their experience and expertise. Since they make all buying and selling decisions, management is the single most important reason for good or poor performance. Naturally you want your portfolio managers to have many successful years to their credit.

Other Stock Market Basics Topics:

  1. Mutual Fund Advantages
  2. History of Mutual Funds
  3. NAV
  4. Dollar Cost Averaging
  5. General advice about choosing a fund
  6. Mutual Fund Ratings
  7. Evaluating Mutual Fund Investment Risk
  8. Mutual Fund Share Classes
  9. Mutual Fund Fees
  10. The Mutual Fund Prospectus
  11. How important is the manager's length of experience?
  12. Why is the prospectus hard to understand?
  13. Mutual Fund Annual Report
  14. Comparing your fund to the competition
  15. Comparing funds on an after-tax basis
  16. Average Return on Investment
  17. How Not to Pick a Mutual Fund
  18. Cashing in Your Fund
  19. When to Sell Your Fund
  20. Mutual Funds and Asset Allocation
  21. When to get started with a mutual fund
  22. Types of Mutual Funds
  23. Value Stock Funds
  24. Growth Stock Funds
  25. Small and Micro-cap Stocks
  26. Mid Cap
  27. Large Cap Companies
  28. Income Stock Funds
  29. Mutual Fund Index
  30. Enhanced Index Funds
  31. Sector Mutual Funds
  32. Stock Market Sectors
  33. Defensive Stocks
  34. International Funds
  35. Real Estate Mutual Funds
  36. Socially Responsible Funds
  37. Balanced Funds
  38. Tax-Efficient Funds
  39. Bond Convertible Funds
  40. Junk Bond Funds
  41. Mixtures of stock types
  42. Closed End Funds
  43. Exchange Traded Funds (ETF’s)
  44. Stock Picking Strategy - Picking your own stocks?
  45. Fund names, and what they really invest in
  46. How to get started
  47. Where can I start investing with no money?

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