With the markets being as volatile as they are, it’s not surprising that many investors are taking their money out of stock mutual funds and moving them into more stable investments, such as bond funds, or even money market funds. But, if you are long-term investor, and growth-type returns are important to achieving your financial goals, you may want to consider a heavier weighting towards equity income funds for solid, consistent returns.
Equity income funds are mutual funds that invest primarily in dividend-paying stocks and other income investments. Throughout the course of stock market history, the larger, blue chip companies that have consistently paid annual dividends to their shareholders have performed the best in good and bad markets. Companies that pay dividends are considered to be more financial stable and, because dividend payments portend strong earnings growth, these companies offer the best long term potential. Equity income funds manage a portfolio of these types of stocks and some funds generate a dividend yield of 3 or 4%, which provides sound protection against market declines.