Income mutual funds are not the same as stock funds and can have a huge difference in terms of what you will make. Some are certainly better than others but how do you know which ones are best? It is definitely true that there are many different investment options out there today and most people have at least some knowledge about the stocks and bonds market. However, there are many other investment options and all of them have their own advantages and disadvantages.
A good comparison is to compare bond mutual funds to stocks. Bond funds need to reveal returns over a number of years, including the current year, one year, two years, three years and so on, if available. Grabbing the top bond mutual fund may not make much sense for a couple of reasons. First, you may not be looking at future returns as part of your portfolio. Second, even if it does work out well over time, you are paying a high cost compared to a lower cost saving bond.
Index funds tend to be either bond or equity funds and invest in either large or small amounts across the country or world. These tend to be diversified across markets and sectors. One advantage is that you don’t have to do your own research to find out what works. However, the drawback is that very few index funds actually beat the market index.
The best comparison I can make is to buy a mutual fund yourself and track it over a one year period. If you do not do your own research and simply buy the top performing funds in the market, you will miss out on the vast majority of opportunities to earn higher returns. Many people just get sucked into the “heat” of the moment and jump into new funds without really doing their research.
Income funds also track cost. Most, but not all, fund managers are highly trained professionals who know exactly how to weight the risk versus reward when deciding whether to add a particular individual to their investment portfolio. They are good judges of expense ratios, liquidity, fees, historical returns, and potential return on investment. This information allows the fund manager to effectively manage risk and rewards an investor according to his or her individual asset allocation.
The goal of most income funds is to provide growth capital. However, this should not be equated with cheap stock investments. The bottom line is that most people do not want to hold long-term debt security and most people do not want to see their salaries cut. Neither does a retiree want to buy millions of dollars’ worth of bonds and let his or her money sit idle until purchased again.
Some people prefer to have the freedom and convenience of investing in stocks, bonds and other types of securities in real time. Some would prefer to have a brokerage account and have investment specialists manage the fund for them. However, the vast majority of people would prefer the simplicity of investing in an individual income fund. Individual income funds can be managed by any individual with an account at a regular brokerage firm. There is no need to entrust the management of your retirement fund in a professional broker or stockbroker.
Income mutual funds are a great way to achieve a long term investment plan. If you are concerned about your retirement plan, you should really consider investing in an individual income fund. There are no restrictions or fees to invest in these funds and you can do it when you want, when you have the cash on hand. The best part about these individual investment accounts is that you will never have to make a decision without first knowing all of the facts. Once you decide to invest, you can move as quickly or as slowly as you like without fear of changing your investment strategy.