A prospectus is a legal document that every publicly traded stock, mutual fund, and exchange-traded fund (ETF) files with the Securities and Exchange Commission (SEC). It lays out basic financial information as well as the mission of the company or fund. Mutual funds and ETFs usually include key information such as fees, expenses, fund objectives, goals, strategy, and risks. A company or fund’s prospectus is readily available to the public.

　　Prospectus basicsWhere do I find a prospectus? Publicly traded companies typically feature a prospectus on their website, along with other investment information. They can also be found on the SEC EDGAR database.

　　Who provides a prospectus? Mutual fund managers will usually post the prospectus on their website. Brokers and financial advisors usually provide a prospectus for potential investors.

　　IPO vs. fund prospectusThe prospectus serves various purposes for different types of investments:

　　Stocks. The prospectus provides background on the company’s history, business, leadership, and goals, as well as its revenue, profit, expenses, and potential risks for investors. This information is valuable for analyzing companies that are about to conduct an initial public offering (IPO).Mutual funds or ETFs. The prospectus usually explains what the fund will invest in, how it will select securities, and when it will sell those investments. It also explains the fund’s past performance in comparison to its peers, and provides a full breakdown of expected fees and expenses for investors.Learn more about different types of investments and why it’s important to read the prospectus.

　　Timothy Lake