Are mutual fund prospectuses written in plain English?

Abstract

Notes US efforts to make documents easier to read and reviews previous research on readability. Presents a study of the readability of the investment objective sections of two mutual fund prospectuses, using a sample of college students, the Cloze Readability Procedure and the Flesch readability analysis. Finds the Cloze test scores well below the “moderately readable” level of the Flesch assessment “difficult”. Analyses the relationships between students’ understanding and their training, investment experience, financial information, gender etc.; and notes that they misjudged their ability to read the prospectuses accurately. Calls for pressure to make the mutual funds improve their literature and for universities to provide training impersonal finance.