A common kind of prospectus that investors may run across relates to mutual funds. It'll generally be a booklet that describes a fund's goals, fees, risks, policies, and investment style. It should show you how well the fund has performed in the past and how much money it will make off you, while giving you an idea of how it will invest your money. If you're thinking of buying shares of a mutual fund, you should obtain and read its latest prospectus. Mutual funds are required to provide prospectuses to help investors make informed decisions. You can request them from the mutual fund company. Many such companies make prospectuses available electronically on their websites.
As an example, check out the prospectus for a fund whose manager we admire -- Legg Mason's Value Trust
You can learn a lot about mutual funds in general in our Mutual Funds area.
Let us help you be a better mutual fund investor. You could do a lot of research yourself online, searching for funds with long, strong track records and managers who inspire your confidence and trust. Or you might simply grab a free trial of our Motley Fool Champion Funds newsletter, and see which funds our analyst Shannon Zimmerman is recommending and has recommended.
Together, his picks have nearly doubled the market's return (as of February), gaining an average of 20% versus 8% in the same time period. Out of about 35 picks, only two were underwater, and by no more than 2.2%. His picks from November, December, and January were up, respectively, by nearly 13%, 10%, and 6% since being recommended.
Learn much more in these Zimmerman articles: