Login | June 09, 2026
Fixed Income Vs. Equity Income
Motely Fool
Published: June 9, 2026
Q. How do "fixed income" and "equity income" funds differ? -- T.H., Ashland, Kentucky
A. Both are mutual funds or exchange-traded funds (ETFs), and both aim to deliver income to shareholders -- thus the "income" in their names.
The term "fixed income" is often used as a proxy for "bonds." A fixed income fund will typically be invested in securities that pay out regular interest income such as government or corporate bonds, as well as certificates of deposit (CDs) and/or money market investments.
The term "equity" refers to stocks, so an "equity income" fund is one that aims to generate income from stocks -- and their dividends.
Many people think of bonds as less risky than stocks; while their prices can be less volatile, bonds vary widely in risk. For example, U.S. Treasury bonds are quite safe, as they're backed by the federal government. Corporate bonds are riskier, so they offer higher interest rates to compensate for that. Junk bonds have the highest interest rates because they're issued by less stable companies.
Over many decades, stocks have generally outperformed bonds, so consider favoring the stock market for most of your long-term dollars.
Q. What's a SPAC? -- K.S., Arlington Heights, Illinois
A. The term "SPAC" is an acronym for "special purpose acquisition company." SPACs are also called "blank check companies" because they're typically launched with no business operations. They're essentially shell companies that execute initial public offerings (IPOs) to raise capital by selling their shares. Then they use that money to buy or merge with another company.
Investors in SPACs often don't know what company they will end up holding shares in, so they must trust the people behind the SPAC.
Fool's School
Buffett Has Passed the Torch
Warren Buffett has stepped down as CEO of Berkshire Hathaway and handed the reins to his longtime manager, Greg Abel. In early May, the company's annual shareholder meeting happened as usual in Omaha, Nebraska, with many thousands attending. Abel led the meeting; Buffett was in the audience.
For those worried about how the company will fare now, there was a lot of reassurance as Abel shared the stage with multiple heads of various divisions, including insurance, the BNSF railroad and NetJets. Abel assured investors that he will maintain the company's culture and principles, saying: "As a conglomerate, we live by the fact that we hate bureaucracy" and "We want Berkshire to endure."
He also said: "We've heard many times: the ABCs -- the arrogance, bureaucracy, complacency that can creep into a company -- will kill a company, and we intend to never allow that to happen."
Here are some nuggets from the meeting.
On artificial intelligence (AI): Abel said, "We're not going to do AI for the sake of AI," and that management will require any AI use to boost the value of the business. He noted that some of Berkshire's subsidiaries are already employing it in different ways -- and that the proliferation of energy-hungry data centers used for AI processing is a tailwind for Berkshire's energy operations.
On opportunities: The company's pile of cash (and cash equivalents) has grown further under Abel, and is now around $380 billion. Abel noted in his letter to shareholders, "While some of this capital is required to support our insurance operations and protect Berkshire against extreme scenarios, it also constitutes our dry powder (to pounce on opportunities)."
In a CNBC interview during the meeting, Buffett noted that the stock market has "never had people in a more gambling mood than now. But that doesn't mean that investing is terrible. It does mean that prices for an awful lot of things will look very silly." And "If you're buying one-day options, or selling them ... that's not investing, it's not speculating, it's gambling. Just totally."
My Dumbest Investment
Wish I'd Used Roth IRAs
My most unfortunate investment decision was investing in my 401(k) beyond the company match during my working life. I wish I'd put more money in a Roth IRA instead. Roth IRAs are unbelievably beneficial when you approach or enter retirement. The Affordable Care Act doesn't count Roth IRA withdrawals as income, and such withdrawals are not subject to required minimum distributions (RMDs), as withdrawals from traditional IRAs and 401(k)s are. In fact, withdrawals from Roth IRAs aren't subject to income tax at all. Roth IRAs are heaven-sent, and Suze Orman agrees. Please tell your friends. -- T.J., Felton, California
The Fool responds: First, congratulations on maxing out your company's 401(k) matching contribution. That was a smart move -- those matching dollars are free money! We also agree that Roth IRAs are terrific. Here's one reason: You can invest in almost any stock or bond via an IRA, whereas 401(k)s typically restrict you to a limited menu of funds. Still, Roth IRAs aren't always best. For example, while the tax-free withdrawals are great, some people would do well to grab the up-front tax deduction for a traditional IRA contribution. Also, IRA contribution limits are much lower than those of 401(k)s.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish Trivia
Name That Company
I trace my roots back to 1948, when a couple launched the first drive-through hamburger spot in California. They soon introduced two-way speaker boxes, so customers could remain in their cars. I built a reputation for fresh ingredients. I'm family-owned and privately held, so no shares of me are available for public purchase. I have more than 400 locations in 10 states, mostly west of the Mississippi, and employ more than 44,000 people. All of my managers began in entry-level positions. Look for my yellow arrow, and maybe order your burger "animal-style." Who am I?
Last Week's Trivia Answer
I trace my roots back to 1947, when I was founded as an engineering and construction company after South Korea was liberated. I worked to rebuild the country's infrastructure. My motor company was launched in 1967, and I am now the third-largest automaker (by volume) in the world. My Ulsan plant is the world's largest, able to crank out 1.5 million vehicles annually. I entered the U.S. market in 1986, and I boast more than 820 dealers nationwide. Worldwide, I employ about 250,000 people. Brands under my roof include Kia and Genesis. My name means "modern times." Who am I? (Answer: Hyundai Motor Group)
The Motley Fool Take
PepsiCo for Growth and Income
If you're seeking a solid, dividend-paying blue-chip stock, consider PepsiCo (Nasdaq: PEP). Its dividend recently yielded 4%, and the payout has roughly doubled over the past decade. It has been increased annually for more than 50 years, too.
PepsiCo benefits from being diversified beyond beverages into food and snacks. In addition to its ownership of beverage brands such as Pepsi, Mountain Dew and Gatorade, it also owns the Frito-Lay snack brands and Quaker Foods.
Through the first three quarters of 2025, PepsiCo enjoyed solid international growth, while volumes declined in North America. Management remains focused on accelerating growth and optimizing its cost structure, since the company seems to have reached a limit with raising prices to keep up with inflation.
PepsiCo's long-term goal is to deliver 4% to 6% annual organic revenue growth and high-single-digit earnings-per-share growth. It aims to enhance its growth rate through strategic investments; PepsiCo bought Poppi for $1.65 billion last year and strengthened its long-term strategic partnership with Celsius.
In response to concerns from activist investor Elliott Investment Management, PepsiCo also plans to cut 20% of its product offerings, lower some food prices and invest more in marketing.
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