An income fund is a fund whose goal is to provide an income from investments. It is usually organized through a trust or partnership, rather than a corporation, to obtain more efficient flow through tax consequences in relation to the income that it earns and distributes.
6-406: An income fund is a type of asset allocation fund. Income funds are often assumed to be bond funds but may be stock funds instead and be more accurately called equity income funds . Typically, they hold stocks with a good history of paying dividends . In fact, a typical income fund holds both stocks and bonds to gain some of the strengths of both. The point in any case is that the investor
12-413: Is higher. Bond funds usually have a target length, such as five to ten years. Thus over time, they need to sell shorter bonds and buy longer bonds to stay in range. A bond fund with such a target length will never "mature" like a specific bond. Some UITs own bonds with a specific maturity date and will terminate at that point. Price charts on bond funds typically do not reflect their performance due to
18-463: Is more interested in income than capital gains, perhaps with the intention the fund will never be sold. Income funds are often used as the endpoint for target-date funds. As each target-date fund approaches and passes its target date, it becomes more similar to the fund provider's income fund. At some point past the target date, the target-date fund may be merged into the income fund, which is then owned by all investors whose target dates are some time in
24-426: Is the rating of the bonds they own. Funds may be rated from high to low credit quality. The quality of a fund is the average of the bonds owned by the fund. Funds that pay higher yields typically own lower quality bonds. Like stocks, the price of high-yield bonds is subject to fashion. For example, in late 2008, many high-yield bond funds were priced at 70 cents on the dollar. In fact, there were few bond defaults and
30-842: The past. Bond fund A bond fund or debt fund is a fund that invests in bonds , or other debt securities . Bond funds can be contrasted with stock funds and money funds . Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than CDs and money market accounts . Most bond funds pay out dividends more frequently than individual bonds. Bond Funds can be classified by their primary underlying assets: Bond funds may also be classified by factors such as type of yield (high income) or term (short, medium, long) or some other specialty such as zero-coupon bonds , international bonds, multisector bonds or convertible bonds. An important property of bond funds
36-417: The price recovered. Due to the lower price, investors sold out of high-yield bond funds, having a desire for "safe" cash and bonds. Funds invest in different maturities of bonds. This may be described by terms like "short", "intermediate", and "long". This affects how the fund value changes with interest rates. Funds invested in longer bonds will have more change. As a general rule, the yield for longer bonds
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