Most fund objectives fit into one of a couple broad categories. Mutual funds tend to focus on growth in value, current income, or a combination of growth and income. Income mutual funds are less popular than traditional mutual funds, but they can be a good investment tool for some investors.
Quite simply, income mutual funds are mutual funds designed to produce current income for shareholders. Income funds invest in bonds and have lower chances than a growth fund of making tons of money, but they generate present day income. Income mutual funds are generally best suited to those who need regular distributions of cash, such as people in retirement. Hopefully, younger people who are investing can live off their paycheck and reinvest the earnings from their mutual funds.
There are several different types of income mutual funds, such as government, mortgage-backed security, municipal, international, and junk bond funds. Other equity-oriented funds also can have income as their primary investment objective, such as utilities income funds and equity income funds.
Most of the income mutual funds will require investors to make a sizeable lump-sum investment. There are others that will allow you to invest smaller amounts on a monthly basis.
Generally, all distributions from income funds are taxable in the year received by the shareholder.
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