What is an Income Mutual Fund?

An income mutual fund is a type of investment. While a person may invest in stocks and bonds on his own, a mutual fund is a little different. When a person invests in a mutual fund, he makes an individual investment that is then pooled with funds from other investors. Often, this allows investors to make smaller contributions yet have their investments professionally managed and spread out over a diversified selection of securities. This may be harder for a sole investor to accomplish on his own, especially if he doesn’t have a lot of money to invest. There are various types of mutual funds in which a person can invest, but an income mutual fund focuses on investing in income-producing securities.

When a person selects a mutual fund, he typically chooses one that will help him to meet a financial goal. For example, a person who wants to see his capital grow may opt to invest in a growth fund. When a person’s main goal for his investment is obtaining regular income, however, he typically opts for an income mutual fund instead.

An income mutual fund typically focuses on investments that produce regular income. To achieve this purpose, an income mutual fund usually targets investments in debts of the government and corporate sectors. For example, this type of mutual fund often invests in mortgages and various types of bonds. Through these types of investments, income mutual funds are usually able to provide steady income to investors in the form of dividends and interest payments.

Income mutual funds usually provide periodic payments to investors, which are often paid to each investor on a monthly basis. The amount of money each investor receives usually depends on the amount of money he has invested in the mutual fund. Usually, an investor may choose between receiving his income payments each month or having them reinvested.

In addition to the benefit of securing regular income, a person may also invest in an income mutual fund because it is low risk. Growth funds, which usually focus on investing in common stocks, are usually more of a risk, but may offer more opportunity for a person’s investment to grow. In some cases, however, a person may decide to work toward both regular income and capital growth at the same time by investing in a growth and income fund instead of choosing one type of mutual fund over the other.