Diversified Income Fund

Are you looking for a steady stream of income from your investments? A diversified income fund might be exactly what you need—but before diving in, it’s crucial to understand how these funds work, their benefits and potential pitfalls.

What is a Diversified Income Fund?

A diversified income fund is an investment vehicle designed to generate consistent income by spreading capital across multiple asset classes. Rather than relying on a single source—like dividends from shares or interest from bonds—a diversified income fund typically includes:

• Shares – Blue-chip and dividend-paying stocks
• Bonds – Corporate and government bonds offering stable returns
• Property trusts (i.e. REITs, property syndicates) – Income-producing real estate investments
• Infrastructure assets – Toll roads, airports and utilities generating revenue
• Alternative investments – Private credit, hedge funds and more

By holding a mix of these assets, the fund aims to balance risk and return while providing regular income payments to investors.

What returns can you expect from diversified income funds?

Returns vary based on market conditions and the specific asset mix, but on average, diversified income funds can offer returns from 4 per cent to 7 per cent per annum.

Some funds focus on higher yields, while others prioritise capital preservation or capital growth. It’s essential to check the distribution frequency—whether monthly, quarterly or annually—to ensure it aligns with your income needs.

What to look out for

Before investing in a diversified income fund, consider:

• Risk exposure: Some funds take on higher-risk assets to boost returns. Ensure you’re comfortable with the risk profile.
• Fees and costs: Management fees, performance fees and transaction costs can eat into returns.
• Liquidity: Some funds allow easy withdrawal, while others have lock-in periods.
• Tax implications: Distributions may be taxed differently depending on the fund’s structure.
• Fund manager track record: A strong, experienced management team can make a big difference in long-term performance.

Benefits of a diversified income fund

If you’re seeking income without the stress of managing individual investments, a diversified income fund can:

• Provide consistent, passive income
• Reduce volatility compared to investing in a single asset class
• Offer access to professionally managed investments
• Diversify your portfolio with ease

Remember every fund is different—from their investments to their fund managers—so don’t expect this is a clear path to success. Do your due diligence before investing—and always speak to your accountant or financial planner before any major investment decision.

Before committing to any investment, do your homework. Compare different diversified income funds, analyze past performance and assess how they fit within your broader financial strategy.

---

Disclaimer: This content is for informational purposes only and does not constitute financial advice. Always consult with a licensed financial professional before making investment decisions.