Summary Mutual Fund Prospectus

Laura Pavlenko Lutton over at Morningstar has forwarded a suggested summary mutual fund prospectus format to the SEC.

Anyone who has looked through a couple of mutual fund prospectuses from different fund companies knows that finding out what a fund is really all about from the prospectus is not an easy task.

I found her letter and example form a solid proposal. I also found her example humorous.

She praises Putnam's description of Putnam Voyager PVOYX as being "very clear and easy to read. They say: 'We invest mainly in common stocks of U.S. companies, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time.'"

She's right- Putnam is very clear about what they do not to mention how they do it. Here is their investment philosophy:

Putnam has been consistent and is very clear about their style. The problem is that Putnam has been consistently terrible. It has "Earned" the lowest possible star rating from Morningstar (One).

With the exception of 2002, this fund has trailed its peers and has consistently bounced around the bottom half of similar funds for a long, long time:

I'll write more about my personal history with this and other Putnam funds soon. In the meantime, hopefully the SEC will adopt a standard for a summary form prospectus making it easier for investors to learn what a fund is really all about. Of course, until then we can simply use Morningstar and other web sites to get this information.

Here is page one of Morningstar's short form proposal (Click image for larger version):

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