Waddell & Reed

Investing in Mutual Funds

With literally hundreds of thousands of stocks and bonds to choose from, it can be confusing and challenging to know where to begin. One way to simplify the investing process and the management of your holdings is to utilize mutual funds. The idea behind mutual funds is fairly simple: a number of people with shared objectives pool their money so that it can be invested and managed by professionals. Through mutual funds, you can also easily access some of the more appealing features of a well-devised investment portfolio.

There are mutual funds for all different asset classes and types of investments. Each fund generally holds a variety of individual stocks or bonds, allowing you to spread your money across a large number of holdings.

You have easy access to your money. You may sell some or all of your mutual funds as needed, at any time, and receive the current value (the net asset value). The value may be more or less than your original cost, and there may be fees or taxes associated with sales.

Convenience and flexibility
Mutual funds offer a variety of different services to shareholders, including automatic investment plans, the reinvestment of dividends, if desired, as well as quarterly statements, and semiannual and annual reports. They allow you to focus on your long-term growth plan, and worry less about choosing individual holdings.

Professional management
Perhaps the biggest benefit is the opportunity to access the expertise of professional money managers. Most individual investors simply do not have the time or wherewithal to manage a broad stock and bond portfolio. As you discuss your situation with your financial advisor, you’ll gain a better understanding of the different types of funds that might be best for your portfolio. Whatever your needs may be, Waddell & Reed offers a broad span of funds across a wide range of investment categories to meet your needs.

Cash Distribution versus Rollover
While it may be tempting to cash out your assets in a former employer's retirement plan, the penalty is significant.

Please remember that an investment in a mutual fund involves risk. The investment return and principal value of an investment in a mutual fund will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Generally, as interest rates rise, bond prices fall. Mutual funds carry fees, expenses, and may involve sales charges not applicable to individual stocks.

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