What is an Income Fund

The primary objective of Income Funds is constant current income and preservation of capital rather than capital growth. They mainly invest in debt securities like Government bonds, Bonds of high rated companies, Mortgages backed by governments etc. Debt securities earn consistent income through interest payments which is passed on to the investors.

Income funds are suitable for the investors who want to maximize current income and willing to take some degree of risk. Income funds are not yet matured in India while they are very common in Europe and the U.S.

There are primarily two different types of debt funds. First one is High Yield funds which invest in long term bonds of low rated companies which carry an extra degree of risk with less stability to the capital and the second one is Fixed Income funds which invest in bonds of high rated companies with little risk to the capital and comparatively lower yields.

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November 9, 2009 | Filed Under Mutual Funds 

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