What does the term "prospectus" refer to in mutual funds?

The term "prospectus" refers specifically to a legal document that provides comprehensive details about a mutual fund's investment objectives, strategies, and risks. It serves an essential purpose in the investment process by informing potential investors about what to expect from the fund, including how it aims to achieve its goals, the types of investments it will make, and the associated risks that investors should consider.

The prospectus is a critical tool for transparency and investor education, ensuring that individuals have access to the necessary information to make informed investment decisions. It typically includes an overview of the fund's management team, expenses, and the historical performance of the fund, alongside warnings about the risks involved.

In contrast, the other options do not capture the complete and formal role of a prospectus. A summary of a fund's past performances provides only a partial view and does not represent the breadth of information in a prospectus. A proposal for new fund investments suggests a forward-looking planning document rather than a detailed legal description of an existing fund. A report on the financial status of the mutual fund might discuss current financial data but would not encompass the strategic and objective-oriented information that the prospectus provides.