Income funds may also invest in convertible securities and investment-grade bonds. Types Each type of income fund has a slightly different investment objective. Though portfolios vary, current income and some growth of capital are common traits. Stocks in their portfolios typically include electric utilities, real estate investment trusts, telephone companies and oil companies. Losses are limited with these funds when the stock market falls.
Any fund is subject to some fluctuations, though income funds are less volatile than many others.
Diversification of portfolio does protect one problem stock from doing too much damage. Many advertisements in financial publications cater to the income investor. Choosing an income-producing mutual fund Make sure you're someone who really needs the income and is in an appropriate tax bracket before investing in one of these. Otherwise, to avoid a current tax bite, you'd do much better with a growth fund that emphasizes capital appreciation. Don't have unrealistic expectations for income funds, and don't expect them to perform as seamlessly as a bank certificate of deposit.