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In this environment of low growth and low interest rates there are still plenty of investment opportunities, particularly in income-focused funds. With close to zero returns from cash savings, investors will need to seek income from elsewhere, and the funds presented here give you a range of options.
We have put together a list of our favourite income funds, which identifies funds covering UK and global equities, fixed income and some alternate sources of income.
For more on alternate sources of income such as infrastructure and high yield, you can also look here.
In addition there are a number of exchange traded funds (ETFs) which focus on income and aim to offer a combination of low volatility and a good level of yield. We have selected SPDR S&P US Dividend Aristocrats UCITS ETF and Vanguard FTSE All World High Dividend Yield ETF, both of which only include companies which are able to sustain their dividends.
For UK and European equity income, investors could look at iShares UK Dividend UCITS ETF and SPDR S&P Euro Dividend Aristocrats UCITS ETF. It is worth noting, however, that the iShares ETF offers exposure to the 50 highest yielding UK stocks, therefore may not offer the potential for long-term capital appreciation. An alternative could be SPDR S&P UK Dividends Aristocrats UCITS ETF, which again focuses on companies with sustainable dividends.
We will talk more about income opportunities in the coming weeks and months.
Exchange Traded Products (ETPs) including ETFs, ETCs and ETNs track a wide variety of underlying investments, some of which may be complex in nature and involve leverage, shorting or a high degree of volatility. It is therefore important that you read the Prospectus or Fact Sheet (available on the issuers’ websites) prior to investing and ensure that you understand how it is structured and the associated risks.
Remember that each fund is unique and hence exposed to different levels of risk. Some are relatively low risk, whilst others can be very risky and those will only be appropriate for more sophisticated investors.
Image courtesy of Martin Pettitt on Flickr
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