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Getting an income from your investment is often an important requirement for people who are retired, approaching retirement or those who need to supplement their salary.
The most popular forms of income investment are bonds (which are also known as ‘fixed income’ investments) and Cash, on which a regular rate of interest is paid out. On the other hand, you can receive income in the form of Dividends from individual Shares or in an Equity Fund. Many Equity Funds are set up to be income focused and tend to have “income” in their name.
Investors looking to grow their capital over time should think about equity Funds which adopt a growth style. You should always firstly consider your appetite for risk, as equities can be more volatile than other forms of investment.
Most growth Funds pay lower or even no Dividends, and whilst they can be more volatile in the short-term than income producing Funds, they can also provide investors with far greater returns over the long-term.
How can you decide between income and growth investments? It all depends on your investment time frame, and what you need the investment to provide for you. If you need a regular stream of income, you should focus your portfolio on Funds that will help you achieve this. If you have a longer investment time period, or you do not need an immediate income, you should think about a larger allocation to growth-focused Funds.
Whatever your preference, if you hold a variety of investments, both growth and income, you should be better prepared for whatever economic ups and downs might be ahead of you. As your financial situation changes over time, you should be prepared to make the necessary adjustments to your portfolio, and switch from growth Funds to income ones as your objectives change over time.
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