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Desperately seeking income

Desperately seeking income


After all, what is the point of having accumulated a certain amount of assets if you cannot enjoy them at the same time?

There are ways of doing this, with a variety of assets moving up at points on the risk scale, but they each have their challenges.

Equity income has been a popular form of investment among investors for many years, and dividends paid by companies are a closely followed part of company investing; there are good reasons for analysts to get worried about companies cutting dividends.

However, some are worried about the over-reliance of equity income funds on FTSE100 stocks, with dangerous over-exposure to just a few businesses, which, if disaster struck, as with BP, could have a material impact on their fund.

Some would argue that an alternative would be to look to small cap stocks, as a means of diversification, especially if an investor wants more exposure to the UK economy.

Another aspect of income investing is to go for fixed income funds. Bond funds have proven to be a useful diversifier against equities, but some think trouble is on the horizon, as there have been mutterings about a rise in interest rates on both sides of the Atlantic.

In this section, we analyse the likely impact of a rise in interest rates on bonds and the investment prospects for those exposed.

Regular income from investment is a godsend for many investors, especially now that pension money is coming onto the market, looking for a home.

Advisers should look at the investment prospects with close scrutiny to make sure they are getting the best deal for their clients.

Melanie Tringham is features editor of Financial Adviser

In this special report