Using funds to get an income
Guide to using funds to get an income
Funds are typically seen as a way to build up a lump sum of money over time,perhaps for retirement, but they can also be used to provide you with a regular income.
This factsheet:
- Describes the main types of funds that can give you an income and compares their performance over ten years.
- Explains the four main forms of income, and the risks and rewards involved.
- Describes the positive effect of investing in an ISA (Individual Savings Account) on your income.
- Lists other important points to consider when you invest in income funds.
The factsheet is for information purposes only. If you need help deciding your investment objectives and choosing a suitable fund, contact a qualified financial adviser. To search for one in your local area, visit IMA’s Financial Adviser search tool: www.investmentuk.org/investorcentre/ifa
TYPES OF INCOME FUND
There are four main types of income fund:
Money Market Funds – pay interest and aim to protect the value of your money.
Bond (Fixed Income) Funds – pay a higher rate of interest than cash deposits, but there is some risk that the value of your original investment will fall.
Equity Income Funds – the income comes from dividends paid to shareholders. In return for some risk to your capital, you may get a more regular income than you would from cash, and that income, as well as your capital, may increase over time.
Property Funds – pay income from rents, but the value of your investment can fall as well as rise.
There are also mixed asset funds, which invest your money in both bonds and equities.