Generating an income through bonds Individual bonds, in the form of gilts, corporate bonds, high yield bonds and euro bonds, offer a fixed income payment over a set period of time. In general, the level of income from a bond should be higher than rates available on cash accounts, but their capital value will vary over time. You can invest directly into bonds, but it's quite a skilled task to choose the right ones. Another option is to invest in a bond fund, where a fund manager selects a range of bonds for you. As fund managers invest in a changing mix of bonds, the income you receive and the value of your capital can fall as well as rise, neither are fixed or guaranteed Generating an income through equities Over the long term, equities have proven to be one of the best ways to grow your capital and provide an income.
Some companies pay out income in the form of dividends.
Historically, the biggest dividends are paid by mature, large companies. As the capital value of your investment increases, so does the potential for your investment to generate a higher level of income. However, as the value of shares can go up and down over the shorter term, and neither your dividends nor your capital are guaranteed, they are classified a higher risk investment than either cash or bonds. Fidelity offers a range of funds for income seekers. You can also choose from Extra Income Fund , MoneyBuilder Balanced Fund and Income Plus Fund each contain an equity element, offering the potential of an income plus some capital growth.