Income fund

Alternatively called a bond fund. Income funds are a type of mutual fund that holds debt instruments such as government bonds and corporate debentures. Its return is based on both interest earnings and capital gains.

Income funds are mutual funds whose investment objective is to produce current income rather than long-term growth, typically by investing in bonds or sometimes a combination of bonds and preferred stock.

Investors, especially those who have retired or are about to retire, may prefer income funds to potentially more volatile growth funds.

The amount of income a fund may generate is related to the risk posed by the investments that the fund makes and the return they generate.

A fund that buys lower-grade bonds may provide substantially more income than a fund buying investment-grade bonds. But the same fund may also put your principal, or investment amount, at substantial risk.