Understand your investment options
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)
Source: 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 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 in stocks is subject to market risk. It is possible to lose money by investing.
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.Find an Advisor
This information is provided for informational and educational purposes only. Waddell & Reed believes the information has been obtained from sources considered to be reliable, but does not guarantee the accuracy of the information provided. This information is not meant to be a complete summary or statement of all available data necessary for making financial or investment decisions and does not constitute a recommendation.
Please note that 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 you to assist in understanding the issues discussed. Neither Waddell & Reed, Inc., nor its Financial Advisors give tax, legal, or accounting advice.
This information is not meant as financial or investment advice pertaining to your personal situation. The selection of appropriate investment, insurance or planning options and/or strategies should be made on an individual basis after consultation with appropriate legal, tax and financial advisors. Nothing contained herein is intended as a solicitation or an offer to buy or sell any product or service mentioned and they may not be suitable for all investors.
Securities offered through Waddell & Reed, Inc., Member FINRA/SIPC, are not insured by FDIC, NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal. Insurance products are offered through insurance companies with which Waddell & Reed has sales arrangements. Guarantees provided by insurance products are subject to the claims-paying-ability of the issuing insurance company.
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