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Equity Income Guide

Growth Vs Income


The appeal of growth
Investors with a long-term time horizon and no need for regular income often opt for growth funds. Because these funds do not have a yield target, they can invest more of their capital in areas of the market that pay lower dividends, such as technology and smaller companies. This gives them the potential to deliver superior growth via share price appreciation. Growth companies, on the other hand, may come from industries with less stable revenues or be at an earlier stage of their development.

The appeal of income
UK equity income funds aim to provide a yield in excess of that generated by the FTSE All-Share and most will also look to grow their income, and the capital value of their investments, over time.

Their income generation characteristics give investors an attractive degree of flexibility, allowing them to: Receive regular payments from the fund, which may be used to augment a pension, for example, or Reinvest dividends in the fund to boost long-term returns.

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