Sometimes funds are managed in ways that contradict the image presented in advertising or promotion. A fund that is touted as a conservative fund — one that selects investments so as to minimize risk and volatility — may be managed in an aggressive manner, putting money into highly volatile small-company stocks, for example.
A fund that calls itself a stock fund may actually keep a sizeable portion of its investment money in cash or in short-term government bonds, which are considered equivalent to cash; thus, it may miss out on some of the gains enjoyed during a strong period for the stock market.
Instead of relying solely on advertising, press accounts, or the advice of a broker, always ask for a prospectus before investing in a fund. This is a detailed description of the fund and its investments, written according to government guidelines. Compare what you read in the prospectus with the sales pitch presented in ads or by a broker. If you feel there’s a contradiction between them, don’t hesitate to ask about it.
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