Income Fund

An income fund is a mutual fund whose goal is to provide an income from investments.

Income funds are often assumed to be bond funds, but they may be stock funds instead, more accurately called equity income funds. Typically these hold stocks with a good history of paying dividends. In fact, a typical income fund holds both stocks and bonds, to gain some of the strengths of both.

The point in any case is that the investor is more interested in income than capital gains, perhaps with the intention the fund will never be sold.

Income funds are often used as the endpoint for target-date funds. As each target-date fund approaches and passes its target date, it becomes more similar to the fund provider's income fund. At some point past the target date, the target-date fund may be merged into the income fund, which will then be owned by all investors whose target dates are some time in the past.