Fund prospectus

The fund's own governing document, stating its objective, its permitted holdings, every share class and its fees, and the risks the manager is obliged to disclose.

Example

A fee waiver, its expiry date, and the fee that applies once it lapses are stated here and usually nowhere on the sales page.

Important

It is the primary document; the factsheet is a summary somebody chose. Anything material that a comparison site and the prospectus disagree about is settled by the prospectus, and the holdings file settles what the prospectus only permits.

Related terms

• Share class — One of several versions of the same fund portfolio, differing in fee, minimum investment, currency or whether income is paid out or retained.
• Expense ratio — The annual fee a fund charges, expressed as a percentage of the money you have in it.
• Primary source — A document that originated outside the transaction and was created for some purpose other than persuading you - bank statements, filed returns, signed contracts, public registers.
• Look-through — Reading a fund's actual holdings and their weights, rather than its name or category, to establish what exposure you hold.

Lessons that explain it

• Appraising one fund: the holdings file, the rules, and the gap to the index — Seven checks, in order of how much they change what you own. The two everybody runs - the name and the expense ratio - are the two cheapest, and the one nobody runs is where the exposure lives. (14 min)

All 578 terms in the Investing glossary