You wouldn’t buy a car before taking it for a test drive first. The same goes for your investments. Why would you buy shares of a fund if you’re not sure what’s inside it?

One of the best ways to learn about a fund is by reading its prospectus. All stocks, bonds, mutual funds, and ETFs are required by law to file a prospectus with the Securities and Exchange Commission (SEC).

When you read a prospectus, you may see a lot of jargon. Fear not! We’ve broken it down and decoded it so you can be a smarter and more confident investor.

What’s a prospectus?

A prospectus is essentially the  financial blueprint of a stock, bond, or fund. (In this article, we’re talking about funds.) The prospectus can help you familiarize yourself with its holdings and objectives, and provide you with information about its performance, managers and fees.

In the old days, a paper version of the prospectus would have been sent to you in the mail. Today, a fund’s prospectus is easily and readily available online. Most times you can find it by simply typing the fund’s ticker and “prospectus” into a search engine.

But the SEC also maintains a database called EDGAR that includes prospectuses, and that’s fully accessible to the public. The SEC keeps all investment prospectuses updated if you want to explore investments or to keep tabs on changes to a fund.

Generally, there are two kinds of prospectus–the summary, and the long-form. It’s advisable to look at the long-form version, as it contains more information.

One of the best ways to learn about a fund is by reading its prospectus.

Here are the main things to look for:

General information

Fund objective: The name of the fund will almost always tell you what the fund’s goals are. But near the top of any prospectus, you’ll also find a general statement about the fund’s objective: Does it track in an index? Is it going after growth or value? Perhaps it focuses on a particular sector or industry, such as technology, energy, or healthcare. As you build your portfolio of stocks and funds, you want to diversify. This section will help orient you as you develop your own strategy.

Fund managers: The names of the people who established the fund, and who runs it, are typically listed. Many times, funds are passively managed because they follow an index. That means there is no active manager picking stocks. Nevertheless, the prospectus will list either an individual or an investment group that established the fund, or oversees it. This can be valuable information for you to conduct more research, or to get in touch if you want to.

Fees and expenses

It’s critical to pay attention to the fees portion of a prospectus, because it will tell you how much it will cost you each year to own the fund. Say a fund has an annual return of 5%, and the total annual fees are 2%, your actual gain would be 3%. Over time, that can really eat into what the investment returns. Generally speaking, you want to keep your fees as low as possible, and industry guidance will tell you that means less than 1%.

Management fees: The managers of the fund may charge for running it.  Management fees are typically deducted as a fixed percentage annually.

12b-1 fees: These are charged for costs associated with the marketing and promotion of the fund, including the sale of a fund through brokers.

Total annual operating expenses, or expense ratio: This is the most important number to keep track of, because it will tell you what it costs to own the fund each year. Generally speaking you want a fund with an expense ratio less than 1%, and as low as 0.25% for index funds with no active manager.

Load: You may be charged a sales fee when you purchase the fund, which is known as a load. You might also be charged a load for selling the fund. Many funds are known as no-load, meaning you can purchase shares–and sell them–without this fee. You might want to seek these out, because they will save you some money.

Redemption fee: If you sell the fund within a short time frame, you may get hit with this charge. For example, if you sell the fund before six months, you might be charged a redemption fee. It’s to discourage market timing–or buying and selling the fund quickly.

You can find out more about fees here.

Holdings

This section is critical, as it will tell you how many companies the fund invests in, and exactly which ones. If the fund is quite large, the prospectus may not tell you each company the fund holds–although that information is public, and widely available on the fund company’s website, other investment sites, or at SEC.gov–it will often tell you the top ten companies in the portfolio, and the percentage of assets it invests in each of these companies. Different companies are assigned different weights in a fund, and this information can help you figure out whether the fund’s investment strategy aligns with your objectives.

Risks

Just as you want to know how your car will perform in bad weather, at high speeds, or in traffic, you also want to know what possibile liabilities your fund might have. The risks section will help inform you about all of that. If the fund invests in only large companies, for example, it will have different risks than if it only follows much smaller companies. The same thing goes for sector-focused funds, which are a subset of the stock market. Each sector is subject to individual economic factors, events, or possible shocks. For example, new taxes or tariffs could negatively affect some industries. Shortages of raw materials might affect others, or new legislation might have consequences for yet other businesses.

Performance

This segment will tell you about the returns of the fund over a period of years. It will tell you things like the total annual return–which will be expressed as a percentage that the fund’s value either increased or decreased during a particular year. (The numbers in the performance section can be quite detailed, and may involve the return after taxes on distributions, which are a part of the fund’s profits.)

The performance portion will also compare the fund’s returns to a category, such as similar funds, typically called peers, or an index such as the S&P 500 or Russell 5000. If the fund you’ve invested in is performing better or worse, compared to a peer or index, that can be useful information about whether you want to invest in or–if you already have–hold on to the fund.

Good to know: In addition to the prospectus, fund companies produce something called a Statement of Additional Information, or SAI. It will provide you with more detailed financial information about the fund, including performance, taxes and debts, as well as details about fund managers and directors. It’s free, but you must write directly to the fund company in order to get it. The address of the fund company is typically included in the prospectus.