Monday, December 27, 2010

Income Fund

An income fund is focused on investing in securities that generate income, which is then passed through to investors who may or may not reinvest the income in additional units in the fund. Income funds may invest in fixed income securities or equities. There are equity funds that focus on generating income by investing in high-quality, cash generative companies that are judged by the portfolio manager to be capable of delivering sustainable growth in dividends over the long-term. Thus managers are keen to find stocks that not only pay a relatively high dividend yield, but also those that will deliver growth in dividends over time, which is important from a performance standpoint and from a real returns standpoint (i.e. after factoring the erosive effects of inflation).

Synonyms: Distributing fund, Income oriented fund, Dividend fund, Income investor

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