Quick Definition

A prospectus is a formal legal document that provides details about an investment offering to the public, typically used by companies during an initial public offering (IPO) or by mutual funds to outline fund objectives, strategies, and risks.

Examples

• 1A technology company issuing an IPO provides a prospectus to potential investors detailing its business model, financial performance, and risks associated with the investment.
• 2A mutual fund's prospectus includes information on the fund's investment objectives, fees, past performance, and the fund manager's background.
• 3An investor considering buying shares in a new real estate investment trust (REIT) would review the prospectus to understand the properties involved, the management team, and financial projections.

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