Chapter 61. Get the Prospectus

YOUR EMPLOYER IS NOT LEGALLY required to provide you with the prospectus for mutual funds offered in your 401(k) plan. That's because the 401(k) trust is the legal owner of the mutual fund shares, not the 401(k) plan participant. So the mutual fund company must provide the trust with the prospectus for each fund. The trust doesn't have to pass the prospectus on, yet most employers do.

If yours is one that does pass along the prospectus, take a look at it. If not, get a copy for yourself or, better yet, go to the fund's Web site. If your plan's mutual funds are sponsored by one of the retail mutual fund companies like American, Fidelity, Vanguard, or T. Rowe Price, you can get a copy by calling the company and asking for one or downloading it.

A mutual fund prospectus can make for dull reading. But it's worth your effort to find out the fund's objectives, restrictions on the portfolio manager, fees, and other charges. Pay special attention to the following items:

Summary of expenses.

Look here for the annual fund operating expenses, the cost of running the fund. These include the management fee, which covers salaries and administrative expenses and the 12B-1 fee, which covers marketing expenses. Most funds also have a category called "other expenses," which includes miscellaneous fees.

In 1980, the average fee for a stock mutual fund was 2.32 percent, according to the Investment Company Institute (ICI), the industry association. In 2008, the average fee ...

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