- The definition of a prospectus is a formal written plan to sell stocks, or a course catalog or printed literature announcing the offerings of a school or business.
- When a company sets forth a plan to sell securities and includes necessary information to inform the investors and then files this plan with the Securities and Exchange Commission (SEC), the plan is an example of a prospectus.
- A course catalog offered by a college listing the classes you can take is an example of a prospectus.
prospectus definition by Webster's New World
Origin: L: see prospect
prospectus definition by American Heritage Dictionary
- A formal summary of a proposed venture or project.
- A document describing the chief features of something, such as a business, an educational program, or especially a stock offering or mutual fund, for prospective buyers, investors, or participants.
Origin: Latin prōspectus, distant view; see prospect.
prospectus - Business Definition
prospectus - Investment & Finance Definition
A document that provides financial and other fundamental information about a proposed public stock or bond. A prospectus provides details about the offering, the company’s business, management, and financial performance as well as information on how it intends to use the funds raised through the offering. Typically prospectuses are issued for initial public offerings and bond offerings. Mutual funds also issue prospectuses before selling shares to the public, as do limited partnerships seeking investors for real estate, oil, or gas investments. The information in the prospectus comes from the registration statement, which the company has to file with the Securities and Exchange Commission before it can sell stock or bonds to the public. The company may issue a preliminary prospectus, or a red herring, while the SEC is reviewing the registration statement. The final prospectus may be called an offering circular. The term red herring is used because of the red letters that appeared on the cover of the offering, warning that the SEC had not yet approved the security for sale.
What is the most important information to be found in a mutual fund prospectus?
The mutual fund prospectus is a legal document that contains valuable information for the investor. Now, it's easy to make fun of a prospectus. It's boring, and, yes, reading one is a cure for insomnia. But the prospectus is worth a close look, and a lot of investment mistakes could be avoided with a careful reading of the whole text. But several sections should be highlighted. First is the expense table. All mutual funds have to lay out in a standardized format all the fees associated with owning a fund. If there is a fee to buy and sell a fund, it's there, plus all the ongoing charges imposed by the fund. Thoroughly scrutinize the financial highlights. It's a lot of numbers, but these figures give a reading on how the fund has done over time and in different markets. The investment objective section is critical. Is this the kind of fund you are looking for? Is it run, say, to generate dividend income, or is the money manager striving for long-term capital appreciation in high-tech stocks? The management page tells you whether the fund is run by an individual or by a committee.
Christopher Farrell, Economics Editor, Minnesota Public Radio, heard nationally on Sound Money®
prospectus - Legal Definition