What is the purpose of a "prospectus" for mutual funds?

The purpose of a prospectus for mutual funds is to provide comprehensive information about the fund's investment objectives, risks, and costs. This document serves as a crucial resource for potential investors, helping them to understand what the fund aims to achieve and the associated risks involved in investing in that specific fund. Additionally, it outlines the fees and expenses that investors might incur, which can impact their overall returns.

By detailing this information, the prospectus allows investors to make informed decisions based on their financial goals and risk tolerance. Understanding these elements is essential in assessing whether the mutual fund aligns with an investor's portfolio strategy and expectations. Consequently, having access to clear and thorough information in the prospectus is vital for transparency and responsible investing.