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Three income funds for later in life.
New pension rules give us much greater flexibility in accessing our pension funds at retirement. One increasingly-popular option is to take some money tax free and keep the rest invested in stocks, shares, funds and other asset classes for the longer term.
If you need money to pay bills once out of work, income funds are one way to collect a regular stream of cash in the form of dividends.
There are hundreds of different funds that pay an income. To get you started in the search for the funds best suited to your needs, here are three examples of the types of products available on the market.
1. F&C MM Navigator Distribution Fund
This invests in a portfolio of open and closed-ended funds and has a historic yield of 4.6% with quarterly dividends. The managers behind the product are long-term investors that focus on finding less well-known, specialist funds. The majority of their returns have come from these fund picks, as opposed to asset allocation.
The team meet over 500 fund managers per year. They are looking for funds that provide a sustainable and high yield.
2. JPM Multi-Asset Income Fund
This fund aims to provide income by investing in a global portfolio of income generating securities such as shares, bonds and Real Estate Investment Trusts (REITs). It looks to achieve the best possible risk-adjusted income, which can be taken monthly, quarterly or reinvested for growth.
The current yield is 3.6% and while income is the main objective, the fund also targets capital preservation and low volatility by investing in around 1,500 underlying holdings which provides welcome diversity. Current holdings include Microsoft, AXA and Vodafone.
Just over half of the portfolio is listed in the US, with 17% in Continental Europe, 10% in the UK and 8% in the Emerging Markets.
3. Ground Rents Income Fund
Ground Rents Income Fund aims to provide secure, long-term performance by investing in long-dated UK ground rents.
These contracts are created whenever a building is sold on a long lease and represent the money paid by the lessee to the owner of the freehold. They normally last for 99 years or more and generally increase in line with inflation or by a set amount every few years.
The fund holds a diversified portfolio of ground rents including freeholds and head leases of residential, retail and commercial properties located throughout the UK.
Its major holdings include state of the art accommodation blocks in Manchester, Leeds, Liverpool and Birmingham. These are yielding between 2.94% and 4.44% with 68% of the income being index-linked.
The fund is structured as a REIT, which means that it has to distribute at least 90% of its income by way of dividends. These are paid on a quarterly basis. It paid 3.538p per share in dividends for the 12 months to 30 September 2015. This is the equivalent of a 3% yield based on the 116.75p share price in mid-February 2016.
This article is provided by Shares Magazine. Shares publishes information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters and does not guarantee the accuracy or completeness of the information in this article.
Investors acting on the information in this article do so at their own risk and AJ Bell Media Limited and its staff do not accept liability for losses suffered by investors as a result of their investment decisions. Shares is published by AJ Bell Media Limited part of AJ Bell.
