What is the purpose of a mutual fund prospectus?

A mutual fund prospectus serves an essential function in informing potential investors about the characteristics of the fund. It describes the mutual fund's investment goals, which outline what the fund aims to achieve, and the associated risks that investors may encounter. This document is a critical tool for investors to understand how their money will be managed and the potential returns they might expect, as well as the volatility and risks involved in the investment strategy.

Understanding the investment goals helps investors determine whether the fund aligns with their financial objectives, and being aware of the risks allows them to make informed decisions about their investments. For these reasons, a mutual fund prospectus is a foundational document that investors should review thoroughly before investing in a fund.