Selecting individual stocks and bonds can be overwhelming. One way to simplify the process is to invest via mutual funds. The idea behind mutual funds is simple: Individuals with shared investment objectives pool their money, which is invested and managed by professionals. Mutual funds may let you take advantage of the more appealing features of a well-constructed investment portfolio, including:
Mutual funds are available in all asset classes and investment styles. Each fund generally holds a variety of individual stocks or bonds, spreading your money across a large number of holdings. Why a mix? Various asset classes and investment styles respond differently to changes in market conditions. Investments in different classes and styles often will move in opposite directions, based on economic cycles or other influences. While diversification and asset allocation does not ensure a profit or protect against loss, it can help reduce the overall risk and volatility of your investment portfolio.
Mutual funds give you easy access to your money. You can sell some or all of your mutual fund shares as needed, at any time, and receive the current share price (net asset value). The value may be more or less than your original cost, and there may be fees or taxes associated with sales.
Services such as the automatic investment plan and reinvested dividends, and required documents, including quarterly statements and semiannual and annual reports, provide ongoing information and simplify how you manage your accounts.
One of the biggest benefits of mutual funds is the expertise of professional money managers. Your Waddell & Reed financial advisor has access to a broad array of funds across a wide range of investment categories, and can help you find funds to fit your financial goals.