Do you read the prospectus?

[cbo111]

Like clockwork, I received the periodic email from my friends at Vanguard saying my "updated fund information prospectus's (or however the heck you make prospectus a plural) were available on line." So, I suppose I should open and read these important documents in short order. But then I don't. I tried in the past to really try to get some actionable information that I might directly apply to my investment strategies. But that never happens. I just say to myself, "well, my VPAS advisor will monitor these and let me know if there is a problem. I think!"
Am I alone in not having an interest in the prospectus?

 

[RobbieB]

No, I never read them.

 

[MBAustin]

I used to read them cover to cover but haven't in a long time. I do try to at least skim the annual reports for actively managed funds, mostly for the manager commentary.

 

[steelyman]

Not any more, but I do read the performance results of funds and stocks, especially at end of each quarter (more so for funds because individual stocks are self-chosen, good or bad).

 

[easysurfer]

I don't have a big enough magnifying glass .

 

[MichaelB]

But there it is, page 97, section 17, subsection CC, paragraph 37.

"Blah blah blah we can do whatever we want and pay ourselves as much as we want blah blah blah ... and if you don't like it, tough".

Clear as day, and you can't say you weren't warned.

 

[Lsbcal]

Nope, no prospectus reading for me.

Mostly I buy index funds and I do know a fair amount about the characteristics of each Vanguard fund I own. If I buy a large cap value fund I want to know that it is really a value fund and not a disguised blend fund that wobbles between value and growth. That is primarily because I have my own method to moving between value and growth. Nowadays the VG index funds are based on the CRSP methodology and tend to be what their names imply.

 

[audreyh1]

I did initially. I do read it if it’s a new fund.

 

[steelyman]

Practically speaking, return on investment as it applies to my holdings is more interesting to me. The “Growth Of $10K” charts are a nod to that but you can get specific stats on your stuff in many ways.

 

[W2R]

No, and then I feel guilty because I didn't.

I had no idea that so many others, besides me, were not reading their prospectus documents.

 

[sengsational]

I keep a big pile of them and occasionally will use it to look something up. I don't think I've every sat down and "read" the prospectus. I've scanned the headings and read a few paragraphs. When the pile gets too big, I grab the bottom half and throw it in the trash. I feel better about that then simply throwing it in the trash when it comes in the mail.

 

[Lsbcal]

I keep a big pile of them and occasionally will use it to look something up. I don't think I've every sat down and "read" the prospectus. I've scanned the headings and read a few paragraphs. When the pile gets too big, I grab the bottom half and throw it in the trash. I feel better about that then simply throwing it in the trash when it comes in the mail.

I just get email with a link. No waste guilt. Getting all financial communication via email is more secure and easier to ignore.

 

[MarieIG]

It has been a long time since I have read an entire prospectus. (Where is the emotie for hanging head in shame.)

I tend to look at the fees first, related index, risk, biggest holdings, distributions, gains, performance (yes, I know past performance is no guarantee . . . )

 

[Stormy Kromer]

I read mine last year. I read how my "tax managed funds" performed more than 50% under the S&P 500 after taxes and expenses for the past 20years since I held them...


Vanguard..where were you in 1994 My fault. I was snookered by a high profile FA who said he could beat the S&P 500 with his eyes closed, AFTER fees.


I'm out of there now. I'm glad I read the prospectus.

 

[rk911]

ya mean you're really 'sposed to read them? i don't actually read software EULAs either.

 

[Totoro]

For broad ETFs/trackers, no. I do read the 'spec sheets' to find out basic things like:
* Synthetic or not
* Dividend reinvesting or paying out
* TER
* UCITS registration
* Tax location (dividend leakage)
* Underlying index that is being tracked, tracking error
* Sample of companies that are included in the index

Most of that is usually on the website of said tracker.

For individual bond issues: yes
For individual shares (annual reports): yes

I don't do actively managed funds.

 

[Badger]

No. With being invested in Admiral Wellesley, Wellington, and a MM fund I don't bother. I do check the fees though.


Cheers!

 

[audreyh1]

You really only need to read a prospectus when you first buy a fund, and that’s mostly to figure out minimums, short-term trading times and fees, etc. as well as investment goals/philosophy, target investments, AA ranges if any. After that there is not really any material change without a by fund holders, so you’ll be notified of those.

The annual reports - they go right to recycling. M* gives me all the essentials at a glance.

 

[Lsbcal]

...
The annual reports - they go right to recycling. M* gives me all the essentials at a glance.

Most of my funds are indexed so I rarely read an annual report. If I do it is to look at the managements forward thoughts or get a sense of how they think about their portfolio choices.

But I do occasionally own an active fund and that is were the management report is kind of interesting. Generally this is in the area of small cap international. My sell/buy decisions are not set by what I read there.

 

[OldShooter]

I do not. The reason is that I never buy an investment product that is so complicated that reading the prospectus is necessary.

For example, in researching for the investment class I teach, I downloaded the prospectus for a variable life policy. 214 pages! That is a show-stopper right there, and it also virtually guarantees that the salesperson does not understand the product that he/she is selling (beyond the lavish commissions). (Just for grins, I text-searched for the word "fee." The many hits were no real surprise.)

 

[jebmke]

If I am investing in a fund for the first time I read the prospectus.

 

[Walt34]

I read the first ones and a few intermittently after that, but haven't read any in years. At this very moment there is one from Vanguard sitting on the dining room table which I have every intention of reading... sometime. Eventually DW will insist that I "do something" with it and it'll go where all unread prospecti go.

If anyone has insomnia they are a great cure for that, second only to Supreme Court rulings.

 

[wmc1000]

What's a Prospectus?

 

[Gallaher]

Never, too much like work

 

[scrabbler1]

I read parts of the prospectus and annual/semi-annual reports, depending on the fund and if I already own it versus investigating the possibility of buying into the fund for the first time.


When I was checking out different bond funds I was going to buy nearly $300k from the proceeds of my company stock 10 years ago to begin my ER, I examined it rather closely. I also look at the chart which shows per-share data by year for the last ~5 years. That chart is also shown in the annual/semi-annual report.


For existing funds I own, I read the interview with the fund manager for that (big) bond fund. I also look for any carryover loss in the fund's latest income statement. This will tell me if there are negative losses which will offset cap gains and reduce or eliminate cap gain distributions. This as the case in the first few years following the 2001-2002 market downturns. I often had trouble remembering where to find this data, as it was usually buried in a footnote. In the pdf version on line, I'd do a quick search for "carryover" or "carry forward" and it would appear, if there was one.