Chapter 8. Using Fund Publications

In This Chapter

  • Understanding prospectuses and annual reports

  • Checking out the Statement of Additional Information

Fund companies produce a lot of materials. Even with the growth and usage of the Internet, plenty of paper and trees get trashed annually.

While much of what funds publish isn't worth much of your time, some of it is and can address important questions you may have (or should have) about particular funds. You can learn about fund fees (including so-called hidden brokerage costs), strategies, investment holdings, risks, to name just a few. So, in this chapter, I walk you through three of the most important fund documents published for each and every mutual fund: the prospectus, annual report, and statement of additional information.

Reading Prospectuses — the Important Stuff, Anyway

Securities laws require every fund to issue a prospectus, and the U.S. SEC reviews the details of every single one (which probably keeps plenty of coffee and eyeglass companies in business). A prospectus is usually written and edited by an attorney who wouldn't know a lively and comprehensible sentence if it clobbered him on the head. You can safely skip most of what's said in a prospectus, but be on the lookout for a few things you should check out.


The most valuable information — the fund's investment objectives, costs, and performance history — is summarized in the first few pages of the prospectus. Read these. Skip most of the rest. The rest only tells you ...

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