Last updated: February 2nd, 2024

What is a diversified income fund?

A type of mutual fund, a diversified income fund is a professionally managed group of varied financial assets. These assets include stocks (which represent ownership in companies), bonds (which are like loans to companies or governments), and sometimes even cash or cash equivalents. 

How does a diversified income fund work?

The idea behind a diversified income fund is to spread your investments across different types of assets, different geographical regions, and different sectors of the economy. This can reduce the impact of any one asset’s poor performance. This strategy is known as diversification, and can provide a balance between potential growth and risk.

The fund’s managers carefully select a portfolio of assets based on those assets’ potential to generate income and increased value without posing undue risk. The income is then distributed to the fund’s investors.

What types of investors choose diversified income funds?

A diversified income fund can be a good fit for several types of investors, including,

  • Retirees and pre-retirees: Those who are planning for retirement and those already retired could consider a diversified income fund as part of their retirement portfolio. Such a fund can generate income during retirement while still offering potential investment growth.
  • Risk-averse investors: For individuals looking for stability, and who want to avoid higher risks, a diversified income fund’s balanced approach may be a good option.
  • New investors: Individuals who are new to investing and want a stable introduction to the market can benefit from a diversified income fund.

What are the benefits of a diversified income fund?

Risk reduction by investing in a variety of assets

Steady income generation

Professional management and expertise

Interested in investing in a diversified income fund or learning more about it? A Sun Life advisor can help.

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Frequently Asked Questions

What types of investments are in a diversified income fund?

Diversified income funds typically invest in dividend or income paying securities. These can include a wide range of assets, such as real-estate investment trusts, limited partnerships and shares listed on a stock exchange. 

Diversified income funds may also buy units of mutual funds. Diversification is also achieved by buying stocks and bonds in global markets and in companies of various sizes.

To find out more, speak with an advisor.

Do diversified portfolios have high returns?

The fund’s management strategy is to blend different investments in a single portfolio. The reason underlying this strategy is that a variety of investments should yield a higher return without necessarily taking higher risks when compared to a portfolio lacking in diversification. 

However, higher returns are not guaranteed. Speak with an advisor to learn more about the potential returns from a diversified income fund.

What is an example of a diversified investment?

Here’s an example of a diversified investment:

A person invests money in different types of investments, such as bonds, stocks, real estate, and cash. This mix helps balance safety and growth, so that one investment’s poor performance won’t cause excessive damage to the portfolio’s overall performance.

This is what a diversified income fund aims to do, taking a varied approach to maximize returns while minimizing risk.

Additional resources

Check out our Investing basics articles to learn about market fluctuations, saving money, interest rates, and more.

Investing basics

In the face of market uncertainty, the best investment strategy is to diversify your portfolio.

Learn more about diversification

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