How do Income Mutual Funds work?
Income mutual funds gather money from investors to use that capital to invest in various assets that generate income. These assets may include government bonds, corporate bonds, municipal bonds, preferred stocks, dividend-paying equities, and other fixed-income securities. It is very important to select and manage these investments to generate income, for the fund.
The profits generated from these investments are then shared with the investors through dividends or interest payments. Investors can choose to receive these earnings as cash or reinvest them by buying shares of the fund. The Net Asset Value (NAV) of the fund represents its holding worth and fluctuates based on how the underlying assets perform.