What Is a Mutual Fund Fact Sheet?

Reviewed by JeFreda R. Brown

Mutual funds can be complicated. It’s easy to go down a rabbit hole looking for information, especially for new investors who don’t know where to start. Many investors often passively trust their funds to a financial advisor or leave them undisturbed and unmonitored in their 401(k) plan. While advisors are useful and often irreplaceable partners in your financial journey, the best investors know their holdings. However, this doesn’t mean you have to pore over massive and poorly organized spreadsheets.

A mutual fund fact sheet allows even the greenest investors to get up to date on a fund’s key facts. Through simple formatting and a focus on easily digestible data, these sheets, typically updated monthly, are a good starting point for new investors.

Key Takeaways

• Mutual funds can be complex, but gaining a basic understanding of your investments is crucial.
• A mutual fund fact sheet is an accessible tool for investors to stay informed about a fund’s essentials.
• Fact sheets detail critical information on fees, risk, and historical returns.
• Analyzing fees on a mutual fund is critical since high fees significantly impact overall returns.
• These fact sheets are easy to find on the fund’s platform.

What Is a Mutual Fund Fact Sheet?

A mutual fund fact sheet is a basic three-page document that gives an overview of a mutual fund. “It’s a great starting point when you’re evaluating an investment,” said Roger Whitney, a certified financial planner at WWK Wealth Advisors.

Fund sheets differ a bit from fund to fund and may be laid out differently, taking up from three to six pages, including a glossary of the key terms. Here’s the information on the fact sheets you’ll typically find:

• The fund name and what it does: You’ll get its full name, its type (equity, bond, hybrid, etc.), and who the fund manager is (especially important for an actively managed mutual fund). Almost all include the fund’s investment strategy and objective, such as whether it aims for capital appreciation, income, or both.
• Performance data: Fact sheets present the fund’s historical performance over various time frames, from a month to 10 years or more. This data is often compared against a relevant benchmark index to show investors how well the fund is doing relative to its part of the market or its peers.
• What the fund holds: This part details the composition of the fund’s portfolio, including the percentages of different asset classes (e.g., stocks, bonds), sectors (technology, healthcare), or geographic regions. This will help you better understand the fund’s diversification and risk level.
• Top holdings: In addition to the above, most include the top 10 holdings. This gives you a sense of the assets that most affect the fund, which is important for managing risk.
• Risk profile: The fact sheet might include metrics such as the fund’s volatility, measured by standard deviation, or other risk assessments to indicate the level of risk associated with the fund. Many have an in-house rating system.
• Fees and expenses: Before you buy a fund, you need to gauge how much it costs. Good returns can be eaten away over time by high fees.
• Minimum investment requirements: Details about the minimum investment amounts for initial and subsequent investments are needed so you know how much you have to put in to start.
• Dividend information: For income-focused funds, information about dividend yields, payout frequency, and historical dividend distributions may be included.
• Manager commentary: Some fact sheets include a section where the fund manager provides more information about what has driven recent performance, any recent changes in the fund’s holdings or strategies, and the outlook based on present market conditions.
• Glossary and additional information: Most have mini-dictionaries of the main terms (especially for funds more popular with retail investors) and disclosures detailing any important caveats about the statements provided.

The fact sheet is almost always available as a PDF on the fund company’s website. If necessary, you can request a copy be mailed to you.

Example of a Mutual Fund Fact Sheet

Above is the main part (truncated) of the mutual fund fact sheet for one of the biggest, the Vanguard 500 Index Fund. The fact sheet provides the details you need, including the investment objective and strategy, the benchmark, annual and total returns, and other relevant fund facts:

1. Fund name, types, and Vanguard share class: The Vanguard 500 Index Fund (VFIAX) is a domestic stock fund specifically designed to track the performance of the S&P 500 Index. It’s offered by Vanguard, one of the largest and first public mutual fund management companies. This fund is in its Admiral Shares class, which typically provides lower expense ratios in exchange for a higher minimum investment.
2. Risk level, net assets, and expense ratio: Vanguard rates the fund as having a moderate risk level, making it suitable for investors looking for a balance between risk and return. It manages net assets (as of the date of the example fact sheet, March 31, 2024) worth about $505.18 billion. It also has a low expense ratio. (The average equity index fund in 2023 was 0.05.)
3. Investment objective and strategy: VFIAX aims to track the price and yield of the large caps in the S&P 500 Index. To do this, the fund uses a full-replication strategy, investing in all the stocks in the index in the same proportions as in the index.
4. 10 largest holdings: The fund includes major American companies (about 80% of the S&P 500 index) and leading corporations across various industries, highlighting its diversified approach to the large-cap U.S. equities market.
5. Ticker, turnover rate, and inception date: VFIAX trades under the ticker symbol VFIAX and has a low turnover rate of 2%, indicating stable, long-term investment holdings. This is typical of passive index funds. The fund was established in 2000, giving you more than two decades of a track record.
6. Growth of a $10,000 investment over time: This chart shows how your investment would have performed had you invested with VFIAX 10 years prior. It’s much more understandable than trying to work through year-over-year percentages and such.
7. VFIAX and benchmark annual returns: Over various periods ranging from a month to 10 years, VFIAX has replicated, with a low tracking error, its benchmark, the large-cap companies of the S&P 500 Index.
8. VFIAX and benchmark total returns: Total return includes capital gains, dividends, and interest income and is usually given as a percentage of the initial investment amount, in this case, the assets in the fund.
9. Sector diversification: The fund’s investments are spread across many sectors of the economy, including technology, healthcare, financial services, consumer goods, and more. This helps mitigate risk and should profit from growth across different segments of the economy.

Why Should I Read It?

Mutual fund fact sheets are to be read by the average investor, so you don’t need a wealth of investment or financial knowledge to understand them. The document concisely explains the benefits and risks of that particular mutual fund.

When you’re choosing among mutual funds, take the time to read these carefully. Gathering this information before fact sheets became the norm was more difficult, but these make it easier for you to gauge a fund pretty quickly. Much of that simplicity comes from easily understood language and fairly standard formatting.

“It’s usually broken down into simple-to-understand verbiage and charts that can often be reviewed at a glance,” John Schneider, a compliance analyst, told us. So what if you’ve read the fact sheet and feel confident in your decision to purchase? “Don’t jump the gun just yet,” Schneider said.

Schneider suggested that you also check the mutual fund prospectus, which contains much more information than the fact sheet. This is where a financial advisor can help. While any investor can suss out the basic facts of a mutual fund fact sheet, an advisor can help you dig into a prospectus to feel more confident about your decision.

How Often Should I Review a Mutual Fund’s Fact Sheet?

It’s generally recommended that you review your mutual fund’s strategy, performance, and fees at least once a year to stay informed about any changes.

How Can the Fact Sheet Risk Assessment Help Me?

The risk assessment informs you of the fund’s potential volatility, helping you decide if it aligns with your individual risk tolerance and investment strategy’s chief objectives.

Why Are Fees Such an Important Part of the Fact Sheet?

These are crucial because they can eat into your investment returns over time, making it important to compare funds offering similar investment portfolios.

How Often Should I Review a Mutual Fund’s Fact Sheet?

While a fact sheet provides valuable information, it’s important to consider other fund prospectuses and do your own independent research. It’s also prudent to seek professional financial advice as you make this crucial decision.

The Bottom Line

You don’t have to be a market whiz to stay on top of how your mutual funds are doing. While there’s always a time and place to seek professional guidance, all investors need to begin learning somewhere. A mutual fund fact sheet is a great place to start, providing the most important information on a fund—from its size and holdings to fees and strategy—before you decide to invest.

Read the original article on Investopedia.