We often know what the right thing to do is, but we just
don't do it. If we want to lose weight, we know we should eat
less (or smarter) and exercise more. Yet instead, we binge
and then go on crazy diets. We know that we should study up
on which digital camera offers the best value given our
needs, but we sometimes just pick the spiffiest one.
With mutual funds, we know that we should read a fund's
prospectus before investing, to get a solid handle on its
investing style and to take in other important information.
But come on -- who has the time or patience for that? The
prospectus for Fidelity's
Contrafund (FCNTX), for example, is 24 pages
long. Even though the fund sports market-beating returns and
a five-star rating from Morningstar.com, with top holdings
that include
Google (Nasdaq: GOOG),
Coca-Cola (NYSE: KO), and
McDonald's (NYSE: MCD), few people take the
time to look through all the documentation.
A solution
So that's the problem -- our inability or
disinclination to wade through tedious prospectuses as we
study mutual funds. Fortunately, here come our friends at the
Securities and Exchange Commission (SEC) to the rescue! The
SEC has recently called for funds to provide "summary
prospectuses" of two pages, distilling the key information
from the longer document. This should make it much easier for
those of us shopping for funds to quickly learn about and
compare a bunch. Some funds have already debuted theirs, and
all funds should be offering them by January.
For example, here's some of the information you'll find in
the summary prospectus for the high-performing
Amana Growth (AMAGX) fund, which recently
included
PepsiCo (NYSE: PEP),
Oracle (Nasdaq: ORCL), and
Intel (Nasdaq: INTC) among its top holdings.
It includes:
The Guinness Atkinson fund family has also prepared
summary prospectuses for its funds. In the four-page one for
the
Guinness Atkinson Global
Innovators  (IWIRX) fund, for example, I
quickly learned things such as the following:
Sony and
Nokia (NYSE: NOK).
Risks facing the fund include that of instability in
foreign companies.
The bottom line
Overall, this is a good thing, a nice development that
can make life a little easier for many investors. But truth
be told, much of this distilled information was already
available at mutual fund websites.
A little more worrisome to me is that when I looked up the
topic on Google, I found a host of companies offering to
prepare these summaries for fund companies. That seems odd,
since it doesn't look that difficult to do, and I hope that
fund companies won't be spending too many shareholder dollars
on such service providers.
Nevertheless, summary prospectuses will be successful as
long as people read them. If you don't have time for 50 pages
or more, at least take the time to read the summary. It could
save you a lot of grief later on.
Do you like top-performing funds? If so, you need to
listen to why Amanda Kish says you should
steer clear of them.
This article was originally published as
Cheating Just Got Easieron
Fool.com
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