Interactive Investor

Don’t be shy, ask ii…why are income funds in this growth portfolio?

27th May 2021 09:14

Dzmitry Lipski from interactive investor

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A reader asks: why does one of interactive investor’s Active Growth model portfolios have two income funds in it?

Dzmitry Lipski (pictured above), Head of Funds Research, interactive investors, says: Fidelity Global Dividend and Jupiter Strategic Bond Funds are managed for total return - the profit generated by a combination of both a rise in the share price and any dividend income – and happen to pay an attractive income. This means they should appeal to both growth and income investors.

Over a five-year period, Fidelity Global Dividend delivered an annualised return of nearly 12%, which is in excess of its Morningstar Global Equity Income peer group and the MSCI World High Dividend Yield Index. The fund’s dividend yield stands at 2.7%. On the other hand, Jupiter Strategic Bond returned 4.2% annually and comfortably outperformed both its Morningstar Global Flexible Bond peer group category and the Bloomberg Barclays Global Aggregate Total Return Index. It also offers stable yield of 3.2%.

Both funds are good core options in a well-diversified portfolio in this context. Although these two funds offer some income distribution, they also provide exposure to different asset classes - Fidelity Global Dividend is an equity fund, while Jupiter Strategic Bond is a fixed-income fund. Combining equities and bonds is essential for portfolio diversification and managing risk. In fact, that makes the portfolio less vulnerable to large fluctuations in either market.

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