Ask Unclutterer: Swimming in financial prospectuses
Reader Erin submitted the following to Ask Unclutterer:
I’ve been focusing a lot lately on reducing my paper clutter in my home office. I’ve made some good progress, but there is one particular type of clutter that nags at me every time I try to cut down: The Financial “Prospectus” that every fund and investment seems to send out every other week (OK, maybe it’s a few times a year. It feels like a lot).
I am only 27 years old and therefore don’t have too many investments, and yet I still have a few stacks of these bulky booklets that are at best the size of a magazine and at worst the size of a small novel. I can only imagine that there are other readers out there who are just SWIMMING in these booklets.
What’s the rule of thumb? How long *should* one keep these books? If you tell me I can recycle at least some of them, I will be one happy girl.
The first thing you need to do is call your financial advisor and see if he or she can e-mail you PDFs of these booklets instead of mailing them to you. Most financial institutions are looking for ways to cut back on expenses right now, and the trend is to provide these as digital documents to their clients. I made the switch about two years ago. It saves them money and saves me space.
Unfortunately, this won’t take care of the documents you already have in your home. I’d ask your financial advisor if he or she can e-mail you copies of the old ones, too. If your advisor doesn’t have access to those files, I recommend keeping just the annual booklets for anything more than a year old. You may want to keep the quarterly booklets from the current year if you have an interest in such things.
And, when I say “keep,” I mean pull out the staples, scan the document, save it as a PDF on your computer’s hard drive, and recycle the original. These documents are good to reference, but they’re not legally necessary for you to keep in paper form.
Thank you, Erin, for submitting your question for our Ask Unclutterer column. Great name, too!
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Posted by Erin on May 15, 2009 |
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20 comments posted
Posted by M.R. - 05/15/2009
Two weeks ago, I asked my financial advisor to email my prospectuses (?) instead of mailing them. I feel like I save some trees and my sanity already.
Posted by Julie Bestry - 05/15/2009
The “tree killer” prospectuses that come in the mail might be fascinating reading for MBA students, but otherwise, I find that my clients have no interest in, nor little understanding of, the charts and graphs. (Try reading past page 3 and you’ll find a prospectus makes a better soporific than thriller!)
I believe that unless you understand all the raw data and have a compelling reason to maintain a prospectus (and I’ve never yet met anyone who fits that criteria), you should be more than safe tossing it in the recycling bin. Unlike monthly, quarterly or annual statements, a prospectus contains nothing relating to one’s own brokerage account, so there’s no need to shred (as long as you remove your proxy card from where you bookmarked the prospectus, just before falling asleep, trying to read it).
Posted by TL - 05/15/2009
+1 to Julie’s comment. Toss them and never look back. The current prospectus will always be on the company/fund’s website anyway.
Posted by Doug Ransom - 05/15/2009
It varys by dealer whether or not prospectus, quarterly, and annual reports are emailed or mailed. We are required to send them. A diligent investor would read them upon receipt.
Regardless, once you have read as much of it as you are going to, I’d suggest just tossing them immediately, or finding an electronic copy online – in canada that is sedar http://www.sedar.com/.
But be careful to tear out any trade confirmations that are printed into the front of the prospectus. Those you should review carefully upon receipt to ensure no errors were made and keep them (I scan mine and keep them forever electronically).
Posted by Dave P. - 05/15/2009
Could one of the financial savvy readers of this blog explain what is worth reading in these reports and prospecti? I’ve been tossing mine — it feels good to do so but I feel rather stupid that I’m investing in funds and don’t understand what’s going on. Thanks!
Posted by Erin Doland - 05/15/2009
@Dave P — Think of them like annual reports. If they’re mutual fund prospectuses, they’ll talk about what investments are in the fund, how those specific investments performed over a period of time, and the rationale behind the fund investing in those investments. There is other information in there, but it’s the same kind of stuff you can find online on any investment analysis site.
Sometimes, there may be a page in the front or back of the prospectus that has information about YOUR account. Like @Doug mentioned, this information is important. However, it is often also printed in your quarterly and annual statements from your financial adviser … so it may be duplicated information. If this data is in your prospectus, be sure to shred this page instead of just tossing it into your recycling bin.
Posted by Rehan - 05/15/2009
For index funds, I don’t think there’s any point in reading anything in the prospectus because their methodology is fairly clear and doesn’t change over time.
If you’re not reading them within a day or two, what’s the chance that you’re ever going to read them anyway? As someone said, there’s nothing personal in these things, just toss them after you’ve read as much as you’re ever going to.
Posted by Dangerman - 05/15/2009
“when I say “keep,” I mean pull out the staples, scan the document, save it as a PDF on your computer’s hard drive”
No.
Like everything else these days, you can get any mutual fund prospectus on this thing called “the internet.” I hear they have “the internet” on computers now.
See:
http://www.sec.gov/edgar/searc.....pectus.htm
Posted by Erin Doland - 05/15/2009
@Dangerman — Great link! But, two of my five didn’t appear in the search. And, one that appeared didn’t go back as far as I’ve been investing in it. This seems to be a great service if ALL of your data is in their database.
Posted by Dangerman - 05/15/2009
“two of my five didn’t appear in the search.”
If they’re US mutual funds, then they’re legally obligated to be in EDGAR. It’s not always easy to get exactly what you want, but its in there.
“one that appeared didn’t go back as far as I’ve been investing in it. ”
That can certainly be true. EDGAR goes to 1995, I believe.
However, the prospectus doesn’t actually tell you anything of value if you are a normal personal investor. Any mutual fund can stray far away from what is described in the mutual fund (see, for example, http://www.kiplinger.com/magaz.....ipad_id=5). So there really isn’t any reason to keep even one prospectus, let alone one that is more than 14 years old.
Posted by Brandon - 05/15/2009
Can’t you just get all of that information electronically? I do.
Posted by Louise - 05/15/2009
We don’t keep ANY prospectuses (prospecti?) in ANY form. The document should help you decide whether to begin, continue, or stop investing in the fund. Once that decision has been made, toss the document.
If you keep such meticulous records that you want lasting documentation about those decisions, then remove just that part of the prospectus that clinched it for you and save that page. Chances are, it is a single sentence or one chart.
If you tell me that the entire 60 page booklet convinced you, then what are you doing reading blogs? You should be solving the world’s financial crisis!
Posted by Erin Doland - 05/15/2009
@Louise — 60 pages?! Whoa. I had no idea they could be that big. All the ones I’ve encountered are usually ten pages total (five scans). Definitely do an SEC search for the big ones. That is ridiculous!
Posted by Pat - 05/15/2009
Once I have read them (and you should read them BEFORE you invest) I put them in the recycle bin. Why keep them?
Posted by Carol - 05/15/2009
I have three different retirement funds with maybe 30 different investments that send out all sorts of reports and annual prospectuses. Most of these things are huge. I found I can look up all the information I’m capable of understanding online.
Reports get tossed immediately. Any paperwork with personal information gets shredded. Unfortuantely recycling seems to be almost non-existant where I live.
I’ve been keeping the prospectuses in my filing cabinet and tossing the old ones whenever I get a new one. It’s not totally uncluttered but it could be much worse. I’m definitely going to see about getting these on-line. At least my e-mail clutter takes up less space.
Posted by Leslie Hope - 05/16/2009
Toss ‘em. All the information is available online. I don’t even open ‘em. Mailbox>>recycling bin. I’ve uncluttered my life by investing only in Vanguard funds, so everything is in one place. Vanguard has a wonderful website that I can use to find out whatever I need to know. The phone support is also good.It also saves me from being ripped off by the Bernie Madoff juniors out there.
Posted by Kristi Wachter - 05/16/2009
Another way to locate the PDF is to look for a document ID code on the paper copy. For example, on the Vanguard S&P 500 Index Fund prospectus, on the bottom of the last page, there’s this:
P040 042009
If you go to Google and type in
Vanguard P040 042009
you get a direct link to the PDF. You can download it and ditch the paper copy.
Posted by Leslie Hope - 05/16/2009
Carol, Eeeek! Thirty funds is waaaay too many. Even six or eight is pushing it. Keep in mind that you are paying annual fees for each one of those funds and they will cut into your returns over the long haul. More of an issue, it is very difficult to keep up with performance on 30 funds. For extreme simplicity you could even consolidate them down to two by using total market index funds for US and international stocks. If you have a broker, he is probably making a killing off you.
Posted by Jay - 05/18/2009
If you are interested in the information in the prospectus, read or skim the document. Otherwise, throw it away.
When I was younger, I read through the prospectuses and NEVER found anything useful. Mildly interesting perhaps, but not useful.
To me, the information in these documents can create mental clutter.
Posted by allen - 05/26/2009
I know that some places have started to charge you if you DO NOT get them via email/look them up on their site. Of course, most of them don’t TELL you they’re going to start charging you, either…
So, for the earth, for your living room, for your WALLET, move over to electronic.
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