Equity Income Fund

There are many financial products an investor can compose his investment portfolio with. For those with a more conservative appetite, the equity income fund is one worthy alternative among staples such as bonds and treasury bills. The equity income fund basically invests in companies that have a good track record of paying out dividends consistently.

So how is this fund different from other types of funds? Most other funds do not pay dividends and the profit (or loss) is only realized when an investor sells them. While the performance of all funds are fundamentally pegged to the performance of the companies they invest in, the key difference that warms the equity income fund to investors is that the companies invested in generally have a good track record of paying dividends reliably in both good times and bad times.

To know whether this kind of fund is suitable for you, you need to ask yourself whether you are in it for the potential capital gain or the reliable and recurring dividend payout. If you are risk averse and want to be ensured of a steady flow of income on a long term basis, then the equity income fund is precisely tailored for you. The price and performance of the stocks might fluctuate but your income will likely remain uninterrupted. It should be pointed out though that the investor is free to compound his dividend gain instead of withdrawing it.

So, can you possibly get rich on this? Unfortunately, the answer is "not likely". The dividend yields are reliable but they cannot make you multi-fold profit on your capital. But after all, this is more of a "iron rice bowl" than a "vintage stamp collection". If you check out the interest rates offered by banks, you are likely to find equity income funds a better alternative. Different kinds of funds have different advantages and equity income funds are characterized by their ability to provide investors with a reliable flow of income.

So when is the best time to buy? In this time of economic turbulence, it seems prudent to be less risky with one's money. By investing in an equity income fund, you remain exposed to the profitable stock market - but in a sheltered way. So if you have to choose a time, now is the best time!

As a responsible investor, bear in mind that you have to conduct your own research regarding which fund is most suitable for you. Remember that if you lose money, you have no one to blame but yourself. That said, some favorites include the Fidelity Equity Income Fund, Franklin Equity Income Fund and the Parnassus Equity Income Fund among many other reputable ones.