| Although a lot has been written about | | | | of these types of investments will diminish. This |
| income-oriented funds not having much of a | | | | means rates will rise less for high yield corporate |
| future ahead of them, some income-based mutual | | | | bonds than they will for government issues which |
| funds continue to outperform even some of the | | | | can and will rise considerably. Hence, the greater |
| lower risk equity funds (and the S&P 500 easily). | | | | price risks are believed to be in government |
| In other words, just because a few people write | | | | bonds, not corporate bonds. |
| about the dangers facing income investments like | | | | 2. Good track record. Most investors will either |
| bonds and other high yield investments, it does | | | | lack the resources and/or funds to create their |
| not necessarily mean that there is no point in | | | | own bond portfolios. As such, they will likely invest |
| owning them. | | | | in mutual funds that consist entirely of bonds. This |
| In reality, a lot of people have no choice but to | | | | makes the investment process quite a bit easier |
| own income funds, even with the prospect of | | | | for a lot of investors because finding historical, |
| higher rates threatening the recent, strong | | | | risk-adjusted performance records is simple. |
| performance that a lot of these funds in enjoyed. | | | | Finding an income fund with a strong track record |
| But not all of them are bad. Many income funds | | | | with solid returns will make for a safer |
| will continue to perform well for a lot of investors, | | | | income-based investment. |
| but the trick will be to find the right one for your | | | | 3. Positive inflows and/or high capitalization. Funds |
| portfolio. | | | | with a steady stream of inflows or those with a |
| Some of the considerations that all investors need | | | | large capital base will mean for greater liquidity. |
| to keep at the top of their investment priority list | | | | This is instrumental with any type of investment. |
| will be the next three things: | | | | The reason it is important for income funds is |
| 1. Good yield. With an above-average yield, | | | | that it allows investors to draw on them... period. |
| investors who own income funds will continue to | | | | The risk of having the fund closed is reduced |
| earn considerable income, even as the market | | | | considerably when the fund is properly funded. |
| value of their income investments drop. In most | | | | While there is certainly some risk to investing in |
| cases, this will mean investing in higher yielding | | | | income funds, the income asset class is a |
| corporate issues that come with a bit of risk. | | | | mandatory requirement for all investment |
| That is because corporate issues will not drop as | | | | portfolios. Choosing the right one will make a big |
| much; while rates increase overall, the risk | | | | difference in investor satisfaction and success. |
| premium that has previously been priced into a lot | | | | |