This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Paul knew that he should have read the prospectus for the "risk-free" stock-market investment before he bought it. But the prospect of reading 130 pages of small print stopped him cold. Instead, he threw away the prospectus and relied on his financial adviser to explain the offering to him.

If you are one of the many people who are averse to reading prospectuses, let me explain something: Prospectuses are like kung fu. They teach you self-defense.

Having written prospectuses as a young Wall Street lawyer, I can share a few tricks on how to make it through the legalese.

First, don't confuse a prospectus with literature. Forget about reading one from start to finish as you would an article or a story. Read it as you would a warning label on a bottle of prescription medicine, remembering that the prospectus is there to protect you. Read it for signs of danger — that is, anything that you can misunderstand to your detriment.

What's an example? If you are attracted to the product because of guarantees presented to you orally, you'll want to confirm your understanding with language in the prospectus. You can ask your adviser to point out the relevant language.

Other examples: What about penalties for early withdrawal (contingent deferred sales charges)? Or something that can work to your advantage, such as a waiver of sales commissions for IRA accounts?

Second, remember that commissioned advisers' job is to sell. Your job is to be a skeptic. Read the prospectus to find reasons you may NOT want to buy the investment. Example: Costs are too high.

Third, scan a few prospectuses. You'll see that they follow a formula. One section will explain the investment; another will discuss risks; others will set out how to buy, how to sell, charges and fees, taxes and so on. Some products come with prospectuses in multiple parts. Be sure to get them all if you are investing serious money.

Fourth, when in doubt, compare and contrast. For example, if you are presented with a variable annuity with guarantees that are hard to understand without an interpreter, ask a competing salesperson to present you with a product he or she would recommend. Have each person present the pros and cons of each product, but don't stop there. Compare and contrast each prospectus as well, section by section.

Fifth, don't buy something before getting answers to the following key questions:

1. What does the investment promise to deliver?

2. Under what conditions will the promise not be delivered?

3. If there are guarantees, against what, by whom and under what circumstances? Guarantees of any sort need to be studied closely, since they can be misunderstood. Unconditional guarantees don't exist.

4. What are the risks associated with the investment in normal markets as well as in the worst-case scenario?

5. What is the most you can lose and under what circumstances?

6. How can you get your money back?

7. Are there any penalties?

8. What are the tax consequences?

9. What are the costs of buying the investment, compared with the cost of owning the investment and the cost of your selling the investment?

With the information you find in the prospectus, you can ask more direct questions and ultimately make a more reasoned investment decision.

As a rule, you don't want to buy something until after you have read about and understood the benefits and the risks of the investment, especially if there is pressure to take advantage of a special feature, such as a bonus that is "only available until 3 p.m. today."

If you are uncomfortable for any reason, pass up the opportunity. Others will come along.

Julie Jason welcomes your questions/ comments (readers@juliejason.com).