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I Think I Get It

Making sense of the dreaded prospectus

When it comes to a good time, reading a mutual fund's prospectus doesn't top anyone's list. But it's the only document that tells you the fund's fees and expenses, what it may and may not invest in, who manages it and how they do it, how to buy and redeem shares, and much more must-have knowledge. Maybe you'd rather read Harry Potter, but the prospectus is more important.

Tom Lemke and Gerald Lins help you with the task in their book, How to Read a Mutual Fund Prospectus (Mercer Point Press). The authors, attorneys specializing in mutual funds and investment management, say they wrote the book for their mothers. "Our mothers could understand a prospectus if they knew where to look," Lemke says. "But like most people, they were intimidated by the document."

The book's information and advice will help more than the authors' mothers overcome their fears. It provides a sharp look at fund expenses (they aren't included in the calculation of a fund's expense ratio); how to evaluate a fund's investment performance when deciding whether to buy or sell shares; the risks of various securities like convertibles, depositary receipts and warrants; and the various shareholder services funds offer their investors.

This book is guaranteed not to intimidate and is worth a read. For more information, check out

DIAN VUJOVICH is an author, a syndicated columnist and the publisher of fund investing site

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the January 2002 print edition of Entrepreneur with the headline: I Think I Get It.

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