Income Funds

Income Funds Income funds can take a number of forms, equity income funds, bond funds or indeed a hybrid of the two. As the name suggests, they are designed primarily to produce income, but income funds can form a valid part of any portfolio by re-investing the income to produce a total return. Equity income funds are likely to be more volatile than bond funds and initially produce a lower yield, but they do have the potential advantage of growing the dividend yield over time and increasing capital growth. Bond funds on the other hand will produce higher initial income but have limited potential for capital growth.

In an investment and financial planning context, funds are generally ‘collective investments'. That is to say that an individual's money is ‘pooled' with those of many other investors to invest across a wide range of shares or other investment media thus giving a spread of risk that would normally be unobtainable to one individual.

Examples of commonly used funds in the UK would be Unit Trusts; Open-Ended Investment Companies (OEICS); Investment Trusts, Life Funds and Pension Funds.

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