We often know what the right thing to do is, but we just don't do it. If we want to lose weight, we know we should eat less (or smarter) and exercise more. Yet instead, we binge and then go on crazy diets. We know that we should study up on which digital camera offers the best value given our needs, but we sometimes just pick the spiffiest one.

With mutual funds, we know that we should read a fund's prospectus before investing, to get a solid handle on its investing style and to take in other important information. But come on -- who has the time or patience for that? The prospectus for Fidelity's Contrafund (FCNTX), for example, is 24 pages long. Even though the fund sports market-beating returns and a five-star rating from Morningstar.com, with top holdings that include Google (NASDAQ:GOOG), Coca-Cola (NYSE:KO), and McDonald's (NYSE:MCD), few people take the time to look through all the documentation.

A solution
So that's the problem -- our inability or disinclination to wade through tedious prospectuses as we study mutual funds. Fortunately, here come our friends at the Securities and Exchange Commission (SEC) to the rescue! The SEC has recently called for funds to provide "summary prospectuses" of two pages, distilling the key information from the longer document. This should make it much easier for those of us shopping for funds to quickly learn about and compare a bunch. Some funds have already debuted theirs, and all funds should be offering them by January.

For example, here's some of the information you'll find in the summary prospectus for the high-performing Amana Growth (AMAGX) fund, which recently included PepsiCo (NYSE:PEP), Oracle (NASDAQ:ORCL), and Intel (NASDAQ:INTC) among its top holdings. It includes:

  • A summary of fees. This one charges no load (yay!) and a total annual expense fee of 1.31%, which is a little above average for stock funds.
  • A reporting of the fund's turnover rate, which is 6%. That means that trades amount to 6% of the overall fund value each year. That's very low, which is good, as it suggests that the managers are committed to their picks and patient for performance.
  • A description of the kinds of investments the fund focuses on: domestic and foreign stocks, mostly smaller ones, undervalued ones, and those that don't violate Islamic principles. (This fund has a religious orientation, and, interestingly, its avoidance of interest-charging financial institutions kept it out of many of the financial stocks that imploded last year.)
  • A discussion of the fund's risks.
  • A review of its performance, both pre- and post-tax. This can help you notice which funds generate big tax hits.
  • Its managers.
  • Its minimum purchase information and purchasing directions.

The Guinness Atkinson fund family has also prepared summary prospectuses for its funds. In the four-page one for the Guinness Atkinson Global Innovators (IWIRX) fund, for example, I quickly learned things such as the following:

  • Its total annual fees are 1.4%, which is a bit on the steep side. On a $10,000 investment growing at 5% over 10 years, they'll total $1,680.
  • The managers look for companies anywhere in the developed world that are "positioned for advances in technology, communications, globalism or innovative management." Its top holdings recently included Sony and Nokia (NYSE:NOK).
  • Risks facing the fund include that of instability in foreign companies.

The bottom line
Overall, this is a good thing, a nice development that can make life a little easier for many investors. But truth be told, much of this distilled information was already available at mutual fund websites.

A little more worrisome to me is that when I looked up the topic on Google, I found a host of companies offering to prepare these summaries for fund companies. That seems odd, since it doesn't look that difficult to do, and I hope that fund companies won't be spending too many shareholder dollars on such service providers.

Nevertheless, summary prospectuses will be successful as long as people read them. If you don't have time for 50 pages or more, at least take the time to read the summary. It could save you a lot of grief later on.

Do you like top-performing funds? If so, you need to listen to why Amanda Kish says you should steer clear of them.

Longtime Fool contributor Selena Maranjian owns shares of Google, Coca-Cola, McDonald's, and PepsiCo. Google is a Motley Fool Rule Breakers selection. Intel, Coca-Cola, and Nokia are Motley Fool Inside Value selections. Coca-Cola and PepsiCo are Motley Fool Income Investor picks. Try any of our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.