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How To Read A Prospectus - Reading A Prospectus

You've probably heard it said more than once that you should always consult a mutual fund's prospectus before handing over your money. The same advice applies to unit investment trusts (UITs), exchange-traded funds (ETFs) and REITS.

While mutual funds and UITs are legally required to provide a prospectus to prospective investors, it's no secret that the size of this document and the type of information inside can be hard to tackle, but don't be too overwhelmed. Here is a guide to what a prospectus is, why it is important and what items should be central to your considerations.

What Is a Prospectus?
A prospectus is a formal legal document, which is required by and filed with the
Securities and Exchange Commission. It provides details about an investment offering for sale to the public, including fees, investment objectives and strategies, as well as the finer points of the past performance, risks, performance, distribution policy, fees and expenses, and fund management.

You can obtain these documents directly from fund companies through mail, email or phone. You can also get them from a financial planner or advisor. Many fund companies also provide PDF versions of their prospectuses on their websites.

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