If you're looking to set up an income-generating individual savings account (Isa) with this year's annual allowance, you could be forgiven for feeling bereft of investment opportunities. Interest rates in most of the developed world are at near-zero with predictions that rates will stay at these low levels as far ahead as 2016. Meanwhile, core government bond yields are at their lowest level in 50 years and where there is yield in the fixed-income arena it comes with considerable default and/or currency risk.
Thankfully, there is one bright spot for investors: equities. An equity dividend strategy focused on high-dividend companies remains one of the few ways to secure an income payment that can keep up with inflation. But with many equity income investment trusts trading at a premium to the vlue of their assets, and more than a third of open-ended UK equity income funds cutting their income payouts in 2011, choosing the right fund is pivotal.
Open-ended income funds: cutting payments