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Managing Your Mutual Fund Documents

Posted on: Thursday, February 7, 2013

Any mutual fund investor soon discovers that mutual fund companies generate a lot of paperwork and documents. Typical mailings include the prospectus, regular shareholder statements, statements of additional information and the shareholder report. What is their value to you? 

Fund statements contain records of your fund investments, including the dates shares were purchased, how many shares were purchased, and at what price. You should keep these statements so you can see how your fund investment performed over time and so that you have the right figures for tax purposes.

The Prospectus is a key document. The Securities and Exchange Commission (SEC) requires that mutual fund companies provide investors with honest and comprehensive information about a particular fund through a fund’s prospectus. It describes the fund’s objectives, strategies, risks, fees and expenses. The prospectus also explains how to buy, redeem, reinvest or exchange shares. The SEC also requires fund companies to provide the Statement of Additional Information, which offers details on corporate aspects of the fund and its advisers, biographies of the fund’s directors and other important information.

Before investing in a fund, you should thoroughly read and understand the prospectus. By law, the prospectus must be provided free of charge to an investor either on demand before an investment is made, or when the initial investment is confirmed. Many mutual fund companies make it easy to download a prospectus, and other fund documents, from their websites. You can also call a fund company and ask to have a prospectus mailed to you.

The Shareholder Report is another important piece of information for mutual fund investors that is full of valuable information. Once you are a shareholder, you can expect to receive shareholder reports quarterly, semiannually or annually. Expect to find the latest financial information on the fund and its performance, the fund’s holdings and the fund manager’s letter, which discusses the fund’s investing strategy and recent results. The shareholder report also includes graphs comparing the fund’s performance over the past 10 years with an industry benchmark such as the S&P 500 Index and other comparative data and graphs to illustrate how the fund has performed.