Woman with papers reviewing her prospectus on the computer.

What is a prospectus?

Investors can learn about a company’s investment opportunities by reading their prospectus. Find out what’s included and how it can help.

One way to help you determine whether a company’s investment opportunities align with your investment goals is to check out the information they provide in their prospectus.

Prospectus definition

A prospectus is basically a packet of information that all companies must make publicly available and file with the Securities and Exchange Commission (SEC) when offering stocks, bonds and mutual funds as investment opportunities to the public.

Purpose of a prospectus

The purpose of a prospectus is to provide detailed information about a company's investment offerings to help potential investors make better informed decisions about their investments.

Preliminary prospectus vs. final prospectus vs. summary prospectus

A preliminary prospectus is what a company will publish before it starts offering any investments. The purpose is to provide potential investors with an overview of the company’s upcoming offerings so they can decide if they’re interested in the opportunity.

A final prospectus is what a company will publish after their offering has been finalized and the investments have been made available for sale to investors. The main difference between a preliminary and a final prospectus is that the final will include the number of investments available along with the price.

A summary prospectus is just what it sounds like — an abbreviated version of a prospectus. While not required, companies often choose to publish a summary prospectus to make it easier for investors to learn about their investments.

What information is included in a prospectus?

A prospectus typically contains the following information:

  • Company background
  • Names of the company’s principals
  • Summary of the company’s financial situation
  • Description, price and quantity of investments being offered
  • Fees and expenses (such as sales charges, management fees, 12b-1 distribution fees, etc.)
  • Objective of the investment (its overall purpose)
  • Principal investment strategies (how the fund intends to invest to attempt to satisfy its investment objective)
  • Principal risks, including a narrative description of the fund's risks and an illustration of the fund's historical investment performance, if available (including one-, five- and ten-year average annual returns)
  • Portfolio managers
  • Procedures regarding how to purchase and sell the fund's shares including minimum investment amounts
  • Tax information including details about payments to persons who sell the fund's shares, if applicable
  • Information about dividends

Prospectus example

Want to see what a prospectus looks like? Check out the investment options State Farm® has to offer.



The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Securities distributed by State Farm VP Management Corp.

Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

Neither State Farm nor its agents provide tax or legal advice.

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