Mutual funds offer several advantages for investors including diversification, professional management and liquidity. But when it comes to regular income, there arises a question.
Is it possible to invest in mutual funds for monthly income?
Yes, it is possible. Mutual funds offer different types of schemes and some of them are designed to provide regular income to you.
Types of mutual funds for monthly income
Equity income funds
Equity income funds focus on buying stocks from companies that regularly pay dividends. In other words, they prioritize stocks that offer a consistent track record of dividend payments. By doing so, equity income funds offer a steady source of income through these dividends.
In addition, equity income funds also have the potential for capital appreciation. That means the value of the stocks they hold can increase over time. Consequently, you can enjoy both a reliable income stream and the opportunity for long-term growth.
Fixed-income funds
Fixed-income funds are investment vehicles that primarily invest in fixed-income securities. These securities include government bonds and corporate bonds. As a result, these funds offer a steady stream of income through interest payments.
Compared to equity income funds, fixed income funds have a relatively lower risk. This is because fixed-income securities have a fixed rate of return and are considered to be less volatile than stocks. Thus, you can enjoy regular income without the same level of risk that comes with investing in stocks.
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Balanced funds
Balanced funds invest in a mix of equities and fixed-income securities. These funds offer regular income through dividend payouts and interest payments.
Balanced funds allow you to enjoy the benefits of equities and fixed-income securities while minimizing the risks associated with each. For example, equities provide the potential for high returns but can also be volatile while fixed-income securities offer lower returns but are more stable.
By investing in both, balanced funds offer a compromise that can generate regular income. Dividend payouts and interest payments provide a steady stream of income to you.
Moreover, balanced funds provide a balanced approach to risk and return. As a result, they can be a suitable investment option if you seek to diversify your portfolio and balance risk with return.
Investing in mutual funds is a feasible option for you to get a regular source of income. However, it is important to consider various factors such as the type of mutual fund, investment goals, risk tolerance and market conditions before making any investment decisions.
