Income funds

These funds can provide you with regular interest income and the potential for modest capital growth by investing in bonds of varying maturities and credit quality.

Learn more about mutual funds

Additional information

Income funds, also known as bond funds, invest in a diversified portfolio of debt instruments such as bonds issued by Canadian federal and provincial governments as well as bonds issued by Canadian corporations.  Income funds with a global focus will invest in bonds issued by foreign governments, corporations and other entities.  Unlike cash equivalent funds, income funds can invest in bonds with longer maturities or different creditworthiness in order to generate a higher level of income for investors.  They are best suited to investors who are focused on generating a higher level of regular income from their investments and are willing to accept a moderate amount of risk in pursuit of that goal.

Did You Know?

Bond prices don’t rise and fall in tandem with stock prices as some of the factors that determine their value are different. In addition to their income characteristics, bond funds, are a key component of a diversified portfolio, offering investors a cushion against stock market volatility.

Bond basics

Fixed income can be an intimidating asset class and there’s no shortage of terminology.  Here are a few introductory bond terms.

Coupon: the interest payment received by the bondholder throughout the life of the bond, typically semi-annually.

Coupon rate: the interest rate, set when the bond is issued, that determines the coupon payment over the life of the bond.

Maturity: the length of time until the bond comes due and the bondholder receives the par value of the bond. 

Principal/Par value: the face value of the bond, typically the amount originally loaned to the issuer, as well as the amount returned to the bond holder at maturity.  A bond can trade below (discount) or above (premium) to its par value.

Credit quality: the likelihood that the bondholders will receive the amounts promised at the due dates. 

Duration: measures a bond’s price sensitivity to changes in interest rates.