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Fund Spy

What Your Fund Manager Should Tell You

Year-end letters provide opportunities for candor, explanation, and connection.

Sometime in the past month, you should have received the annual reports for some of your mutual funds in the mail or online. (Funds that end their fiscal year on Oct. 31 sent the reports a couple of months earlier.) These documents contain much of interest, such as a fund's holdings, expense ratio, turnover rate, and the amount of money paid to its board of directors. Most of this information appears in a standardized format. But one section can take almost any shape the fund company or manager wants: the letter to shareholders.

This letter, or "management commentary," is worth reading. In many cases, it can provide you with a window into your manager's thinking and provide insights that would be difficult to obtain even by intensive study of all the other available information. And if the letter fails to take advantage of that potential, that in itself can be telling.