High risk nets high interest rates in new income fund

Savings-minded consumers who have watched their interest rates dwindle from their traditional High Street bank accounts have a new high-risk, high-reward investment fund.

While the traditional interest rates on investment funds have been at about 4 per cent, Ignis has launched a new fund that delivers a rate of 7 per cent to UK customers.  The UK based asset management company calls the scheme their Enhanced Income Fund.  It operates by reserving some money from its growth and disburses it as income to consumers.

Industry experts caution from putting all your eggs in this particular basket, however.  Mark Dampier, a financial adviser from Hargreaves Lansdown stated that pursuing that level of income is inherently risky; despite Ignis purposefully engineering the fund to minimise the financial risks, the possibility of the fund underperforming in a surge in stock market prices is a distinct possibility.

Dampier further commented that the fund is ideal for pensioners looking to supplement their income through high interest rates on their savings.  He cautioned that any investor considering this new fund should make sure to diversify their holdings appropriately in the case of underperformance.

Most industry experts are convinced that stock market pricing will maintain an even keel for the moment, however.

Ignis plans to manage its investment fund in such a way as to be able to consistently offer an interest rate return of somewhere between 5 and nine per cent.

Shcroder, another investment house, is currently offering a similarly structured investment fund.  Named the Income Maximiser, the fund is designed to also pay out at 7 per cent; early forecasts are predicting that the fund will achieve that goal by the end of the fiscal year.  This differs from the regular income fund that Shroder offers, which only delivers returns of approximately 3.5 per cent.

Schroder’s Income Maximiser fund keeps a portfolio with  shares in companies such as Barclays, GlaxoSmithkline, Lloyds, Vodafone and Rentokil.

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