You've finally decided to take the plunge and start investing in mutual funds. Or perhaps you've been investing for a while, and it's time for something new. Either way, you may face a difficult decision – "Which mutual fund is right for me?" Unfortunately, there is not one correct answer, because every situation is different. However, there are a few questions you can ask yourself that may help to narrow down your choices.

"What is my investment objective?"
Are you investing for your retirement, children's education, or a major purchase such as a house or car? Answering this question helps you focus on what you are trying to achieve with your investment, and it also leads into the following question…

"What is my time frame?"
Now that you know what your ultimate goal is, you probably have a good idea of how long it will be before you will need to access your investment. If, for example, you hope to retire in 25 years, you may decide to open up a more aggressive fund, because you have a longer period of time to help you ride out the ups and downs of the market. However, if you are putting money away for a house that you would like to buy within the next year or two, a more conservative investment may be more suitable.

"How much risk am I willing to accept?"
Volatility in the market is another important consideration. You want to make sure that you are comfortable with your investment, and that the first market downturn doesn't send you running for cover. Stock funds tend to be more aggressive investments, which means that there may be a greater deal of share price movement from day to day. This volatility tends to make them more suitable for longer-term investments of five or more years. On the other hand, if you would rather see a smaller degree of daily price fluctuation, then a bond fund may be more appropriate.

Stock funds should only be considered for long-term goals as values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond fund values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. In general, when interest rates rise, bond fund values fall and investors may lose principal value. Some funds, including non-diversified funds and funds investing in international securities, high yield bonds, small- and mid-cap stocks and/or more volatile segments of the economy, entail additional risk and may not be appropriate for all investors. Consult a Fund's prospectus for additional information on these and other risks.

After addressing these questions, you may have a better understanding of what type of fund you are looking for.


 

To learn more about Wells Fargo Advantage Funds^SM or other mutual fund companies, visit our Fund Companies. For particular fund information, visit Fund Selector.