Editor's Views: "Income" Funds, Airports and Boris Johnson

The industry needs to tighten up on the naming of funds, especially if they don't deliver what investors expect, says Holly Black

Holly Black 26 July, 2019 | 12:27PM
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 Editor's views

Investors have to do their research. You want income? It’s up to you to pick a fund that’s going to provide it. But fund houses have to take their share of the responsibility too.

What's in a Name?

If a fund yields 1% or less, is it really right to put the word “Income” in its title? At best, it’s confusing for investors, and at worst, it’s just plain misleading.

Income has been a popular word since base rate was cut to virtually zero and a decent yield has become increasingly difficult to come by. So it’s no wonder that funds have pounced on the term in order to try and attract investors – a quick search in Morningstar Direct showed me there were more than 6,000 funds with “Income” in their title, and it appears that not all of them are living up to their name.

We found two funds yielding less than 0.5% - that is pitiful by any standards. We were told that other share classes of the same fund had a greater yield, or that this paltry yield was only because fees had been taken from it. Even taking that into account doesn’t get you anywhere close to beating inflation, nor does it get your anywhere close to a decent yield.

These funds aren’t breaking any rules – their sectors don’t require them to produce a certain level of income – but, for me, it isn’t really in the spirit of things. It’s an obvious area where the Investment Association and FCA could easily tighten up, and where fund houses need to get better an self-regulating. In the meantime, it’s up to us to do our research.

Invest in What You Know

I’ve spoken before about the idea of investing in companies you use and enthuse about. This week, I found myself stranded in Amsterdam for 36 hours longer-than-expected as the entire airport was forced into paralysis when something went wrong with the fuelling system.

We’ve written recently about the myriad struggles facing the airline industry and questioning the outlook for this sector. The cost of compensating thousands of frustrated passengers and paying for their accommodation and new flights seems like yet another obstacle that would put me off hitting “Buy”.


Whenever there is a major political or economic change, people naturally wonder what that means for their investments. This week our new Prime Minister was confirmed.

Will the stock market flourish or founder? Will there be tax cuts or changes to the lifetime allowance?

Should I change my portfolio? I don’t know the answer to the first two questions, but I do know the answer to the third: no.

In all of the excitement and uncertainty it’s easy to get a bad case of FOMO (that’s the Fear Of Missing Out) and start tinkering with your investments in a bid to try and pick the winners and losers as we speculate over what the next few years could look like. But, honestly? You’re most likely just wasting your time.

I know I’m boring but that won’t stop me saying it: investing is for the long-term, and the best advice at these times of change is usually just to do nothing.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk


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