Portfolio income usually becomes a concern when an investor is reaching the later stages of their financial planning horizon. As the window shrinks for a portfolio to realize capital appreciation, investors look for safer bets that provide a more guaranteed rate of return. This is especially important if you depend on your investment portfolio for annual income. We’ve made it easy for you to get an initial list of mutual funds focusing on income with predefined A+ First Cut screens.
A fund’s yield is the measurement of the income it has paid out over the trailing 12 months divided by its month-end net asset value (NAV), expressed as a percentage. All types of funds have income payments (or dividend distributions), so the yield figure is useful to compare a fund’s income to other funds within and among investment categories.
A+ Investor’s First Cut screens make it easy for you to find attractive mutual funds with a focus on generating income. These screens are linked in the My Fund Tools section of the A+ Investor Toolkit dashboard and are programmed in the Funds+ Screener.
In an equity fund, income is normally generated from dividends paid by the stocks that the fund holds. In a bond fund, the income normally includes the interest paid on bond investments that the fund holds.
The more you depend on your investment portfolio for annual income, the more you will want to emphasize funds with relatively higher payouts that tend to be consistent each year and that protect your principal investment. Funds with higher yields tend to provide less capital appreciation but also carry lower risk.
Income payments go hand-in-hand with a lower-risk profile because a fund needs to keep a certain amount of cash on hand to meet its obligations. It can’t necessarily rely on market growth, and the viability of selling shares to generate regular income is always a question.
Beware of funds with yields that are relatively high compared to other funds in the same investment category, as they are likely to be engaging in market timing by building a defensive cash position. Also, funds with very different yields from the investment category average that are not engaged in market timing may not be following their investment objectives or the objectives may not be clearly stated.
You can select one of the high-yield predefined screens in the Funds+ Screener from the drop-down menu found in the Filter Menu on the left side of the screener. Perhaps the best part of these predefined First Cut fund screens is that they do the basic work of setting up the Funds+ Screener for you. The predefined filters siphon off a group of funds that may be of initial interest to you, but you can always add your own filters to narrow the list even more. Any predefined screen can be modified and saved to your own screen list with a new name.
The High-Yielding Equity Funds screen catches no-load stock funds open to new investors with yields above their category average, accompanied by an expense ratio below the norm for their category and minimum initial purchase no higher than $10,000. It excludes institutional funds and special share classes.
The Lower Risk, Higher Yielding Equity Funds screen looks for domestic stock funds that pay a higher yield and have experienced less volatility in their returns than the majority of their category peers.
The Highest Yielding Short-Term Bond Funds screen filters for no-load bond funds open to new investors with yields at least matching their category average that are invested in short-term (one- to three-year duration) government and non-government bonds.
As shown in the image above, when you load a predefined screen, you see each filter listed above the screen results. To bring the funds with the best yields to the top of the results, scroll across to the Yield column and click on the up/down arrow next to the column name.
