Tuesday, March 16, 2010

The Meat of the Prospectus

To follow up on yesterday's report on investor behavior, we received another study from IRI, the mutual fund group, on how much attention investors pay to prospectuses. The answer: Not much.

Only one fifth of all investors always read the prospectuses sent to them about their investments. A little over half, or 56 percent, say they read their prospectuses either sometimes or always.What would make investors more likely to read them? Nine out of ten respondents said they wanted a short summary form of the prospectus rather than pages and pages of details. In other words, they'll read a prospectus as long as it's something other than a prospectus.

The survey also asked investors what pieces of information are most important to them in a prospectus - in other words, what they'd want to see in the shortened version. The answers were fees, returns and risks, in that order. Mutual fund companies, take note.

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