Income remains the holy grail of investing, the latest sales figures from the Investment Management Association (IMA) have revealed.
Last month UK Equity funds outsold all other regions, seeing inflows of £505 million. In total, private investors poured £2 billion into open-ended funds last month - making the third quarter of 2013 the best-selling three-month period for funds since the second quarter of 2000.
The most popular IMA sector was UK Equity Income with sales of £358 million, the largest level since April 2007. The second most popular sector was Mixed Investment 20-60% Shares, formerly known as the Cautious Managed sector.
Fears over the US shutdown and on-going problems in the Eurozone meant UK investors favoured the domestic market, with UK focused funds proving the most popular, followed by Global funds which saw inflows of £365 million and then Europe with inflows of £240 million in September.
Senior investment manager at Hargreaves Lansdown, Adrian Lowcock, said that the low levels of interest available on cash, gilts and bonds mean investors were turning to dividend paying stocks.
“Equity income continues to remain popular with investors as the interest earned on cash remains low and returns on gilts and bonds have come under pressure following suggestions in May from the Federal Reserve that they would cut the rate of Quantitative Easing (QE) later this year," he said.
Jason Hollands, Managing Director at Bestinvest said that not all equity income funds would continue to deliver in the future however.
"Rising share prices have in turn pushed yields down on equity income funds, narrowing the yield premium they have enjoyed for some time over corporate bond funds," he said.
"In our view it is important to invest with managers focused on stocks with the potential to grow their dividends from here, not just those with a current high yield but where the level of dividend cover may be weak or where the business fundamentals could deteriorate."
Investment into ISAs last month totalled £102 million - a significant improvement on the same month last year, which saw investors take £26 million out of their ISAs.