How to Read a Mutual Fund’s Prospectus

By Matt Krantz

Mutual fund companies are required by regulators to clearly explain to investors, in writing, everything an investor would need to know. This information is contained in a regulatory filing called the prospectus. These documents are very detailed and worth reading before you invest in a fund.

Nearly all the most vital data contained in mutual fund prospectuses are captured by mutual fund websites described in the preceding sections. You don’t need to dig through a prospectus to get things like fees or investment objectives. But a section of the prospectus that’s often left out of the websites is the Risks section, which outlines all the things that could go wrong. That’s worth checking out.

Also, the SEC provides guidelines on what to look for in the prospectus.

You have several ways to get the prospectus online, including the following:

  • The mutual fund provider’s website: The mutual fund company’s website almost always has a link to the prospectus.

  • Sources for regulatory filings: Mutual fund prospectuses are regulatory filings, so you can retrieve them from many of the same places you can get companies’ filings. The Securities and Exchange Commission’s website provides the information for free. (The figure shows the SEC’s Search for Mutual Funds Prospectuses page.)

    The SEC's website makes mutual fund prospectuses readily available to online investors who know whe

    The SEC’s website makes mutual fund prospectuses readily available to online investors who know where to look.