General Securities

Understand your investment options

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Life has a way of changing our perspective and sharpening goals. Where do you want to be in 10 years? Or 20? Whatever your goals, you’ll likely need to save some money to get there. Savings alone, though, likely will not be enough to get you where you want to be over time.

Why? Because over time, things inevitably get more expensive. It’s known as inflation, and it consistently pushes prices higher over time.

The real cost of inflation over 30 years (% increase cumulative)

Inflation: The Rising Cost of GoodsSource: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Indexes, as of November 2015

Investing in mutual funds, stocks and bonds can often provide a way to stay ahead of inflation. There is evidence that you have the potential to accumulate more assets by investing. Stock investing may involve more risk, and there are no guarantees of future results. But along with a certain measure of risk, investing can put some power behind your plans. Your financial advisor can show you how.

Mutual funds can make it simpler

The idea behind mutual funds is simple: a number of people with shared objectives pool their money so that it can be invested by professionals in a variety of securities. Each fund typically holds a selection of individual stocks or bonds, allowing you to spread your money across a number of holdings.

Through mutual funds, you can access some of the more appealing features of smart investment plan, such as diversification, liquidity, convenience and flexibility.

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. Working with your financial advisor, you can create a customized and personal investment portfolio.

Remember a few key investing concepts:

  • Follow a solid investing strategy rather than emotion.
  • Don’t let a short-term reaction overtake your long-term plan.
  • Invest regularly and stay committed to your goals.
  • Work closely with your advisor to consider all your investment options.

Other general investment options

Stocks

Stocks are a type of security that signify ownership in a corporation and represents a claim on part of the corporation's assets and earnings. Many companies issue stock, also known as equity, to raise funds for the company. Stock prices, or the value of each share, can rise and fall with the fate of the company.

Investing is stocks is subject to market risk. It is possible to lose money by investing.

Bonds

Bonds, commonly referred to as fixed-income securities, are a debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.

To help cushion the potential volatility of stocks in your portfolio, you may want to include an investment in bonds to seek to provide stability, or reduce overall price movement. Another attractive feature of bonds is that they typically may provide ongoing income.

Investing in fixed income products is subject to market risk. It is possible to lose money by investing. Fixed income securities are subject to interest rate risk and, as such, the net asset value may fall as interest rates rise.

Brokered Certificates of Deposit (CDs)

Brokered certificates of deposit (CDs) can offer principal preservation and income and may serve as a sound portfolio foundation.

Certificates of Deposit (CDs) are promissory arrangements between an investor and a bank, where the issuing bank agrees to pay a predetermined interest rate in exchange for the investor agreeing to deposit funds for a fixed period of time.

In the U.S., CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions. Brokered CDs differ from bank CDs in that they can be traded on the secondary market. The secondary market may be limited. The pre-maturity sale price of CDs may be less than its original purchase price, particularly if interest rates are higher at the time of sale. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Your ability to sell a CD on the secondary market is subject to market conditions.

Create a custom-built plan today.

Whether through mutual funds or by buying individual securities, stocks and bonds are the foundation of investing. Contact a Waddell & Reed Financial Advisor to learn more about each option.

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This information is provided for informational and educational purposes only.

The information provided may include references to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to assist in the understanding the issues discussed. Neither Waddell & Reed, Inc., nor its Financial Advisors give tax, legal, or accounting advice. You may want to consult with your accountant or tax advisor to discuss your personal situation.

Past performance is not a guarantee of future results. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance.

Not all account types may be available on all platforms. Some products & services may not be available with all accounts. Brokerage, investment and financial advisory services are made available through Waddell & Reed, Inc., in its capacity as a registered investment adviser. Brokerage accounts cleared through Pershing LLC.  SEC-Required Report on Routing of Customer Orders

How many types of government savings bonds are there, and what's the difference between them?

While the U.S. government has issued 13 types of savings bonds, there are currently only two series available for purchase through the U.S. Treasury Department.

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