What document details the investment objectives and strategies of a mutual fund and is required by law?

• A. Prospectus
• B. Annual Report
• C. Shareholders' Letter
• D. Fact Sheet

Answer: (A)

The document that shows what a mutual fund aims to achieve and how it plans to do it, along with the associated risks and costs, is the prospectus. This is the primary legal disclosure filed with the SEC and provided to investors. It lays out the fund’s investment objectives (for example, growth or income), the strategies it will use to pursue those objectives (such as which asset classes, sectors, or securities it may buy), and the risk factors investors should consider. It also details fees and expenses and often includes performance data, so investors can compare funds.

Other common fund documents serve different purposes but aren’t the legally required, comprehensive disclosure of objectives and strategies. An annual report focuses on the fund’s financial results and performance for the year. A shareholders’ letter is a communication from management to investors about views and commentary. A fact sheet provides a quick summary of key facts but isn’t the formal legal document that outlines objectives and strategies.