What Is a Prospectus?

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A prospectus is a disclaimer saying to read the information that describes all of the information about a company. Discover the functions of managers in a prospectus with help from a portfolio manager in this free video on personal finance and money management.

Part of the Video Series: Stocks & Bonds
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Video Transcript

Okay, so you're wondering what a prospectus is, and you probably see commonly please read the prospectus on a lot of mutual fund information in particular. And what that is is just a disclaimer to say read the information that describes every last bit about the company. It'll tell you who the managers are, you know, what their functions are in the company, what past performance has been. Prospectuses will also tell you that, you know, never look at past performance as an indicator of what's going to happen in the future because we just don't know. You can see if something's well managed, and maybe assume that going forward things will be positive and that the fund will make money. But, a prospectus is something that you need to look at, you need to read, and need to just understand at least the basic points that are being made in the prospectus. Because the fund company wants to make sure that you fully understand what you're purchasing and why, and to make sure that it's something that's suitable for you, and it's something that you're going to be happy with, hopefully, longer than shorter term.

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