Options have their place in an investor’s overall toolkit. When used judiciously, options can help increase the income generated by a portfolio and provide downside protection to wary investors. Two funds to examine that use options are Van Kampen Equity Premium Income Fund (VEPAX) and Gateway Fund (GATEX). Although the news in recent years has highlighted the risks of certain investment strategies, such as options, the headlines shouldn’t dissuade investors from learning more.
When investors look at purchasing a fund, they often review a fund’s objective and its historical performance. While both are logical to examine, it is also important to know exactly who it is that is managing the fund, since this person is, ultimately, the one to whom an investor is entrusting his or her money.
Mutual funds rose in popularity during a time when the accumulation of wealth was the main focus of most investors. Now, however, as more investors end their work careers, there looms a demand for a product that replaces a salary. This is the exact opposite of what most mutual funds are set up to do and the vast majority of fund companies do not appear to be preparing for the change that is slowly happening. A few, however, have ventured into the waters of distribution-focused mutual funds.