While many bond funds pay out monthly, the same is not true of their equity counterparts, and the need to create a diversified portfolio in order to protect capital means that simply choosing bond funds is unwise.
Here FE Trustnet looks at the options open to the retail investor.
UK Equity Income
There are only six IMA UK Equity Income funds that pay a monthly yield, according to data from FE Analytics.
Threadneedle UK Monthly Income, run by Jonathan Barber and currently yielding 4 per cent, has the best track record of the six.
Performance of fund vs sector and benchmark over 5-yrs
Source: FE Analytics
From a capital growth point of view it has slightly outperformed the sector average and the FTSE All Share over the past five years.
AWD Chase de Vere’s Patrick Connolly said: "There’s only one we use and that’s Threadneedle Monthly Income, but we would only use that for clients who want monthly income."
"We like the Threadneedle UK equity team and we use their Threadneedle UK Equity Income fund more often."
Investors could also turn to the Insight UK Equity Income Booster, which has made 25.2 per cent over three years, slightly less than the 28.91 per cent of the Threadneedle fund. It is yielding a substantial 8.79 per cent.
Premier Monthly Income has made 24.78 per cent over that time and yields 5.62 per cent, while AXA Framlington Monthly Income yields 4.5 per cent and has made 21.61 per cent over three years.
CF Canlife UK Equity Income has made 20.59 per cent over this time and yields 5.45 per cent, while the tiny Quems Monthly Income fund yields 5.2 per cent, but was only launched last year.
Rob Morgan, investment analyst at Hargreaves Lansdown, said: "None of those are funds we would highlight as the funds we use."
"One problem that the manager is always going to have in the back of his mind is that he has to produce a monthly income, so having this consideration could potentially impact his decisions."
Bond and equity income
Connolly said: "It tends to be more the equity and bond funds that pay out monthly income and you will tend to get a quite lumpy return anyway with a monthly equity income fund as the yield will be very different from month to month."
Morgan said: "It’s a bit of a forgotten sector and we don’t currently use any of the funds in it. We have looked at Ecclesiastical Higher Income."
"However our systems showed a lot of the returns had been generated by style rather than stock selection, which we tend to view as less repeatable."
Five crown-rated Ecclesiastical Higher Income is run by FE Alpha Manager Robin Hepworth and has made 165.67 per cent over 10 years, the third-highest returns in the sector.
Performance of fund vs sector and benchmark over 10-yrs
Source: FE Analytics
Despite its strong performance, Morgan says the fund has not won a place on Hargreaves Lansdown’s Wealth 150.
"They are a smaller organisation so there’s more 'one-man' risk," he explained. "They have a smaller team, so even though Robin Hepworth is clearly a very good manager, he’s always going to have that problem in attracting funds."
Mixed investment
"You might be better off looking at the mixed investment sectors," Morgan continued. "We use Invesco Perpetual Monthly Income. What you get is basically Neil Woodford plus Paul Causer and Paul Read, so you get exposure to those excellent managers."
Invesco Perpetual Monthly Income Plus sits in the IMA Sterling Strategic Bond sector, although it holds a mixture of bonds and equities.
Data from FE Analytics shows it is currently yielding 6.51 per cent and is a top-quartile performer over one, three and five years, making 49.33 per cent over the latter period.
Performance of fund vs sector and benchmark over 5-yrs
Source: FE Analytics
Portfolio construction
Both Connolly and Morgan agree that, for investors who have the money, the best option is to spread it among funds that pay out on different dates.
"If you did want a monthly income from income funds you would be better off designing a portfolio around the funds that happen to pay a quarterly income at different times," Morgan commented.
Connolly said: "In all cases the first priority has to be asset allocation. It’s better to make sure you get your asset allocation right and get a quarterly income rather than insist on a monthly income and create a worse portfolio."