A Look at a Variety of Income Funds

Income funds have become a very popular investment because of it's residual income. There are a number of different types of income funds available on the market today. Here is a closer look at some of the choices that you have for these types of funds.

Bond Funds

The bond fund is the most common form of income fund available in the market today. Bonds are a debt instrument that is issued by an entity to investors. Investors can purchase these bonds, and then receive a regular interest payments over the life of the bond. At the end of the bond term, they can then redeem their bond and receive their full investment back.

Bond funds can be purchased by anyone with a brokerage account can buy into them. Also, the bond fund creates a very diversified portfolio for investors that do not rely on a particular bond, from a particular company. The bond fund could potentially hold thousands of different bonds and spread out the regular interest payments to all of the investors. This creates a nice residual income that is usually paid out monthly or quarterly to the investors.

Municipal Bond Funds

Another category a bond fund that is very popular is the municipal bond fund. This type of fund is very popular among those that have a lot of money to invest. With the municipal bond fund, the fund it looks to invest in bonds are issued by municipalities such as city governments, county governments, school district, and state governments. The major benefit of this type of bond, is that there is no tax liability created from the interest that is received. Therefore, when you buy into a municipal bond fund, you receive interest-free income for as long you hold the shares.

Equity Income Funds

The equity income fund is one that invests in stocks as the underlying asset for the fund. However, instead of the normal rationale that a mutual fund employs, they are not going after stocks that are primed for growth in the future. Instead, these funds seek out companies that are well-established and have a good history of paying dividends. The dividends are then disbursed to the shareholders as part of their income stream.

Real Estate Funds

Another popular type of income fund is the real estate fund. This type of fund invests solely in real estate holdings in an effort to provide income to the investors. These funds typically only invest in commercial properties in well-established areas that can provide a steady source of rental income to the fund. The fund will purchase many different real estate properties in an effort to diversify the fund over several different markets. Many of these funds will even diversify into international markets in an attempt to lower the overall risk of the fund.

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