Could anyone give me a pointer on funds - I'm looking at investing in some high yield funds - Do funds ever cut their dividend (distribution)? Under what circumstances is that permissible?
Is the distribution guaranteed - or is it able to be cut at any time?
Thanks,
MV
Depends if you mean fixed income (bond) or equity income funds. But in any case, the distributions are not guaranteed. Who would guarantee them? The fund manager? Equitable life had a product that guaranteed returns. When interest rates fell, it couldn't meet the guarantee and got into all sorts of trouble.
The only savings which are guaranteed, up to the Government-backed Financial Services Compensation Scheme (FSCS) are bank deposits. But this doesn't mean you'll get £85,000 for every account you hold - the £85,000 is per financial institution.
In any case it is normally a bad idea to buy funds (apart from low cost index trackers). Because the pricing is so untransparent. See my blog post
http://brucepackard.com/some-thoughts-on-unethical-investing/
How about the Royal London Sterling Extra Yield Bond that currently pays around 7% and is a well regarded fund.
Given the low interest rate environment I would urge you to ensure you fully evaluate the risks involved in the assets held by any high yield fund.
As a suggestion, a sensible long term option might be the Vanguard Lifestrategy 100, although it is not high yield.
