What is a tear sheet?
The term tear sheet can have different meanings depending on the industry. In finance, a tear sheet is a single-page document that is used to summarize key information about individual companies or funds. The term “tear sheet” dates back to the days when brokers literally tore a page out of a larger set of documents to show their clients. These were common before the advent of the internet, where it is now easier and more cost effective to find business information online.
In the world of advertising, a tear sheet is a page that is torn from a publication to prove to a client that an advertisement has been published. The military uses the term for certain memos or emails that are used to communicate messages from subordinates to superiors.
Key points to remember
- In finance, a tear-off sheet is a one-page summary of a mutual fund or individual company.
- The tear-off sheet usually includes key fundamental information and a graph displaying historical performance.
- Today, most documents are delivered online, and many types of abstracts are considered tear-off sheets.
- The tear-off sheet is different from the mutual fund prospectus, which mutual fund companies are required to give to their investors and is usually much longer than a tear-off sheet.
Understanding Tear Off Sheets
A tear-off sheet sometimes refers to a fund company fact sheet or other one-page marketing material. The term is derived from the days before the Internet when Standard & Poor’s produced one-page summary sheets for public companies. Each page is a summary and could be torn from the larger book. In the mutual fund Today, the tear-off sheets are sometimes called “fund information sheets” and include information on historical performance, top portfolio holdings and asset allocations.
Financial advisers and brokers often provide tear-off sheets to potential investors to give them an overview of the possibilities investment Opportunities. The sheet typically includes company information, such as market capitalization, earnings, market sector and a chart or graph of historical stock price development. The detachable sheets can be presented one by one, or grouped together in a folder and left with the client.
While the tear-off sheets date back to when brokers would tear out individual pages from the S&P summary book and send them to current or potential customers, most of the information is pulled online today. Therefore, any concise representation of a company’s activity fundamentals could be considered a teardrop leaf.
Tearsheet vs. Prospectus
When evaluating a mutual fund, a tear-off sheet differs from a prospectus in that the tear-off sheet is usually only one or two pages and usually contains an investment summary, the investment manager’s benchmark, a graph showing historical performance, a few statistics (such as three years or five years alpha and standard deviation), as well as information about the fund company managing the investment.
A mutual fund prospectus is a much longer document. It details the fund’s strategy and investment objectives. The prospectus also includes information about the portfolio managers, fund company, historical performance and other financial information. It is available directly from a fund company by contacting them by email, post or telephone.
The prospectus must be provided to an investor no later than the time of investment in a fund. Although many brokers or fund companies use tear sheets to market their products, it is not necessary to provide one to a potential investor. The prospectus, on the other hand, is required by law.