The investment industry is awash with statistics on fund performance. If you want to know how a fund has performed over three months, six months, one year, five years or ten years, the information is readily available. While past performance is not a guide to future performance, it is another part of the fund’s jigsaw of information that helps complete the picture along with asset allocation, fund manager details, investment policy and the like.
The situation radically changes though if you are interested in investing for income and you set about finding out how much a fund has paid out in the recent past. Now the position changes from the historical performance of the accumulation fund to the future expectation of distribution of the income fund.
If past performance is not necessarily a guide to future performance, how can expected performance be a guide to actual performance? And what is the point of showing fund performance figures that include the very distributions that people seeking to compare income funds want to identify?
Performance figures would make some small sense to people who want information about income distributions if they were stripped of the income reinvestment element of the performance. At least the claims of funds who say they aim to pay a reasonable income while at the same time delivering asset growth could be tested.
Investing for income appears to carry the same health warning that investing anywhere else does. Do your own research about the fund composition, management style and future likely economic conditions and come to your own conclusions.
