WE GET IT: NO ONE WANTS TO READ A fund prospectus, and few investors ever do. “I can tell you precisely how many clients read the prospectus: zero,” says Lew Altfest, chief executive of Altfest Personal Wealth Management, a New York City–based investment manager.
But reading a fund’s prospectus is an important step in making a good investment that’s right for you. The trick is to focus on specific bits of information about a fund that are listed in the prospectus: the fund’s objective, its investment approach and potential risks, the fees it charges, and the tenure of the manager. If you know where to look for these tidbits, it makes the task of reading a prospectus simpler. We’ll tell you where to find them.
But which document should you read? Some funds issue two prospectuses, a “statutory” one, which is the traditional, long-form document, and a “summary” prospectus, a simplified version. Both have what you need to know, but stick with the more readable summary, if it’s available.
Investment objective. Typically just one sentence long, the fund’s objective is usually found at the beginning of the prospectus. Often, a fund’s aim is focused on either growth (capital appreciation) or income (capital preservation), or sometimes a combination of the two. That matters because it can be a clue to how much risk the fund takes.
Funds with a growth focus will likely invest in stocks, focusing on those its managers believe have the best prospects to increase in value. For example, American Funds’ The Growth Fund of America invests only in stocks. Its investment objective is “to provide you with growth capital.”
This story is from the February 2023 edition of Kiplinger's Personal Finance.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the February 2023 edition of Kiplinger's Personal Finance.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
A SOLID YEAR FOR THE KIPLINGER 25
All but one of our favorite actively managed, no-load mutual funds gained ground as markets recovered.
YOUR VACATION HOME COULD PROVIDE TAX-FREE INCOME
If you plan to rent out your vacation home, it's important to understand how your proceeds will be taxed.
IT'S NOT YOUR IMAGINATION: YOUR CEREAL BOX IS SHRINKING
To avoid raising prices, some manufacturers are reducing the size of common grocery items. Here’s how to fight back.
SHOULD YOU WORRY ABOUT BEING LAID OFF? IT DEPENDS ON YOUR INDUSTRY
Downsizing has hit certain sectors. But cutbacks may be slowing, and some companies are expanding.
How identity thieves are exploiting your trust
Con artists themselves are disguising as well-known brands to steal your money and personal information.
CUT THE COST OF YOUR WIRELESS BILL
AT&T, T-Mobile and Verizon dominate the market, but smaller outfits offer similar network coverage at lower prices.
MAKING HOME ENERGY MORE AFFORDABLE
Households in need can get energy-efficiency upgrades, help with utility bills and more from this nonprofit.
A HEAD START FOR SAVERS
The Saver's Credit is designed to help low- and middleincome taxpayers contribute to a retirement account.
Say I Love You With a Money Date
To nurture a lasting bond with your partner, meet regularly to talk about money.
Plan for Your Own Elder Care
AFTER I wrote a series of columns in 2022 about elder care planning for family members, I received a number of responses like this one: “What about married couples who have no children or whose family members don’t live nearby?” wrote one reader. “Or a single individual with no close relatives? How should these people plan for their own elder care?”