How do I Choose the Best Equity Income Fund?

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  • Written By: Dana DeCecco
  • Edited By: A. Joseph
  • Last Modified Date: 25 August 2019
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Choosing the best equity income fund might require some research on your part. Equity income funds are available in the form of mutual funds, exchange traded funds and index funds. You also have the option to build an equity income fund by purchasing dividend yielding stocks. To choose the best equity income fund, you will need to consider your financial goals, and you should look at various analysts' scores and rankings of funds. You also might want to consult with a financial advisor.

Dividend income and capital appreciation are two factors to consider when searching for the best equity income fund. The primary objective of the investment is to generate income from dividends. The secondary objective is capital appreciation from the increase in value of the individual stocks.

Financial services websites and fund brokers evaluate various income producing funds. These services provide scores and rankings. Industry analysts take into account performance, risk and expenses to arrive at a list of recommended funds. The investor seeking the best equity income fund may focus on funds paying the highest dividends while providing growth potential.

Several equity income funds focus on dividend income as their primary objective. Mutual funds with dividends being the primary source of total returns might be attractive to investors. Exchange traded funds that focus on dividends are another option.


These types of funds focus on current income and not growth. A solid track record of paying high dividends should be taken into consideration. Short and long-term track records should be examined for performance under various market conditions.

By investing in individual stocks that historically pay high dividends, you can create a portfolio of stocks that provide a source of income. You might want to research blue-chip, low-risk stocks paying the highest dividends. Dividends are generally paid on a monthly or quarterly basis.

The best income equity fund might incorporate a diversified portfolio. Many funds focus on specific stock market sectors. Investing in a specific sector or industry might not provide enough diversity.

Risk management might require a more diversified portfolio. Some income equity funds are focused on level of risk. The risk level associated with the fund might be a major factor in fund selection.

Market fluctuations might cause the equity income fund to be worth more or less than the original cost when redeemed. The collection of dividends might enhance or offset this difference in value. A well diversified portfolio might decrease the risk of fund devaluation caused by negative market fluctuations.

Professional advisors are available to guide you to choose the best equity income fund. You also might decide to purchase a fund through an online broker. If you are an experienced investor, you might prefer to create a fund by investing in dividend-paying stocks.


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