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2 Top Income Funds

Principal Global Diversified Income and Hartford Balanced Income are worthwhile multiasset funds delivering both income and total return.

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Janet Yang: Income has been a hot topic these last few years, and multiasset income funds have received a lot of investor attention. Today, let's talk about two of the top funds in the space. They both produce income to varying degrees, but just as important, Morningstar analysts also think they're worthwhile on a total return basis.

First, Principal Global Diversified Income is a good choice for investors looking for a fairly consistent stream of monthly income. The spikes in this chart's blue line shows that each December, the fund also tends to throw in a year-end income kicker. That pattern stems from a few areas, including year-end dividend payments. Over the last five years, through the end of October, investors have seen an average 12-month trailing yield of about 5.1%.

To generate that income, the team here looks for the best risk-adjusted yield among a range of asset classes. This can get into some of the more specialized areas of the market, like infrastructure and preferred securities. We really like how this fund's team goes to outside subadvisors who are experts in those areas. This has brought strong risk-adjusted returns with notably strong results in down markets.

For investors that may not need as much yield or who tend to reinvest that income, Hartford Balanced Income is a good choice for them. It has a record of paying a steady quarterly income stream, and its trailing 12-month yield over the last five years has averaged 2.7%, which is almost 40% greater than the S&P 500's.

It's closer to a traditional asset allocation fund than Principal Global Diversified Income, though it's still not a run-of-the-mill balanced fund. On the equity side, management looks for stocks with a yield that's at least 25% greater than the S&P 500's. The fund's bond portfolio takes on more credit risk than most balanced funds through its high-yield and emerging-market debt holdings. That brings a bit more volatility and somewhat higher downside risk. On a total return basis, though, the fund has handily outpaced its custom index and peers.

The Principal fund is Bronze-rated; the Hartford fund is Silver-rated. Both are good choices for investors looking for income.

Janet Yang Rohr, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.