Explore the top income funds of 2017 with detailed insights into their strategies, performance, and how they can fit into your investment plan. This comprehensive guide covers domestic and international options, highlighting funds that offer steady income and capital growth potential for savvy investors seeking reliable returns.

Understanding the Best Income Funds of 2017: A Detailed Overview

In the dynamic world of investment, income funds have long been a popular choice for investors seeking reliable cash flow while aiming to preserve capital. As we explore the most prominent income funds of 2017, it’s essential to understand what sets these funds apart, their underlying strategies, and how they can fit into your overall investment portfolio. This guide provides an in-depth analysis of the leading income funds of that year, highlighting their features, performance metrics, and investment philosophies.

The financial news portal TheStreet employs a rigorous methodology to rank the top income funds that performed well in 2017. These funds include VictoryShares US Discovery Enhanced Volatility (CSF), PowerShares S&P 500 High Dividend Low Volatility (SPHD), WisdomTree Fundamental US High Yield Corporate Bond (WFHY), UBS AG FI Enhanced Global High Yield ETF (FIHD), First Trust Preferred Securities and Income (FPE), Guggenheim BulletShares 2023 High Yield Corporate Bond (BSJN), First Trust Managed Municipal Bond (FMB), PowerShares National Municipal Bond (PZA), WisdomTree Short Term High Yield Corporate Bond (SFHY), and PowerShares Preferred Portfolio (PGX). Each of these funds offers unique features tailored to different income and growth priorities.

While income funds are traditionally considered vehicles for current income generation rather than capital appreciation, modern investors recognize that it’s possible to balance both objectives. Some funds are designed to deliver steady income streams while also aiming for capital growth, providing a more comprehensive investment approach.

Top Income Funds of 2017: An In-Depth Look

One notable fund is The New Economy Fund, launched in 2015 with assets totaling $15 billion. Its primary goal is long-term capital growth, and nearly half of its assets are invested internationally, focusing on equities of leading global companies. Among its primary holdings are Netflix, Alexion Pharmaceuticals, and Hologic. These stocks are selected for their growth prospects, resilience, and market leadership. The fund exemplifies a balanced approach, targeting growth while providing a steady income stream.

The AMCAP Fund, established in 1967, remains a favorite among income-focused investors. It has accumulated approximately $45 billion in assets, primarily invested in equities with attractive valuations and good growth potential. Its primary sectors include healthcare and technology, with major holdings in giants such as Amazon, Microsoft, and Facebook. Since inception, AMCAP has achieved an average annual return of roughly 11.6%, demonstrating its reputation for stability and consistent performance over decades.

Another prominent player is the Growth Fund of America, launched in 1973 and presently managing assets worth around $141 billion. This fund has a solid track record, with an average annualized return of approximately 13.78% over five-year periods. Its investment universe encompasses domestic and international equities, with top holdings including Amazon, Alphabet (Google), Home Depot, and Gilead Sciences. The fund emphasizes capital appreciation but also maintains a focus on income generation.

The Washington Mutual Investors Fund, initiated in 1952, underscores the value of conservative, income-oriented investing. With $75 billion in assets, it targets both income and capital growth. Its portfolio reflects a cautious approach, with holdings in industrial giants such as Microsoft, Wells Fargo, Boeing, and Coca-Cola. Over recent five-year periods, it has delivered an annualized return of around 13.18%, sustained by its diversified industrial sector exposure.

The Fundamental Investors Fund, established in 1978 and managing about $71 billion, aims for both capital appreciation and income. With a five-year annualized return close to 13.18%, its portfolio includes a mix of domestic and international stocks, emphasizing sectors with growth and income potential. This fund exemplifies the balanced investment approach, catering to investors seeking stability and growth.

According to financial insights from Forbes, several funds stood out as attractive investment opportunities in 2017. One such fund is the Driehaus Emerging Markets Small Cap Growth Fund (DRESX), which follows a growth equity strategy. Despite its relatively modest assets of $319 million, its focus on emerging markets and small-cap stocks offers significant growth opportunities—though it remains somewhat underrecognized among investors, providing potential for high returns with higher risk.

The Ridgeworth Seix Floating Rate High Income Fund (SAMBX) is another notable option. It specializes in floating rate bonds, which are particularly advantageous in environments where rising interest rates threaten fixed-income investments. Given the Federal Reserve's policies aimed at maintaining low interest rates in previous years, floating rate funds gained importance. When interest rates increase, these funds tend to outperform traditional bond funds, making them suitable for inflation protection and income generation during such periods.

Outgoing, expensive stocks are often evaluated with valuation metrics, and Forbes suggests that in 2017, dividend yields of 6-7% could be common among income investors, especially if rate hikes are subdued. Transitioning from common stocks to preferred shares can further enhance dividend income, potentially increasing yields by 100-150%, thus serving as a strategic move for income-focused portfolios.

Finally, the Vanguard FTSE All-World ex-US Index Fund (VFWIX) embodies international diversification. By comparing valuations across global markets, this fund offers exposure to non-U.S. equities, helping investors capitalize on growth opportunities abroad while managing risks associated with domestic markets. Its broad diversification makes it a compelling choice for income and growth-minded investors seeking comprehensive international exposure.

In conclusion, the year 2017 offered a plethora of investment options tailored to income seekers. Whether through domestic giants like AMCAP and Growth Fund of America or international funds like Vanguard’s ex-US fund, investors could find opportunities aligned with their risk appetite and income requirements. Understanding the nuances of each fund’s strategy, holdings, and performance metrics is crucial for constructing a resilient and income-generating investment portfolio.