The definition of an income fund is a mutual or other fund that has it's core investments in established dividend paying stocks and fixed income. These funds and the stocks within it pay regular dividends. They are more predicatble, but offer less of a chance for high capital gains later on.
These funds normally perform within a range in up and down years for the stock market. An income fund can fit into any portfolio, but it is best for people who would like or need income and who do not want to take on too much risk in the future.
Retirement income funds contain debt securities such as government and corporate bonds but they also contain dividend-paying stock and preferred stock as well as money market accounts and are good for a retirement investment
account. Many of these funds have strong diversification. While some income funds are all bonds, some others might be composed of only low priced stocks. Normally, in times of recession, both bonds and value stocks increase in worth.
The reason is because of the interest rate.
Some retirement income funds contain taxable bonds and others contain tax free municipal bonds. Usually Investors in the highest income brackets have advantages from tax free Munis but that is not 100% true.
You want to look at the tax free yield, by subtracting your tax bracket from 100. If you're in a 15 percent tax bracket, it would be 85. You divide that number into the states yield of the tax free mutual fund.
BOND FUNDS invest mainly in fixed-income securities of publicly
traded companies and municipal issuers.
The investment objective for
fixed-income securities includes wealth or asset preservation. Bonds,
especially highly rated bonds, are typically secure investments that may not
lose principal value. Of course, as interest rates decline, the value of bonds
increases, and as interest rates increase, the value of
The value of a bond fund is based on the underlying value of the bonds held
in the fund. If interest rates increase, the net asset value of the bond
fund decreases in value.
Bond funds vary with their investment objectives and include corporate
bond funds, global bond funds, government bond funds, and tax-free bond
Copyright American Investment Training, Inc. Income Fund Investing Strategy and Training Services