Fixed Income Investments are a type of investment where investors lend money to an issuer (such as a government or corporation) in exchange for regular interest payments and the return of the principal amount at maturity.
These investments are considered low-risk compared to equities, making them ideal for those seeking a stable and predictable income stream.
Key Features of Fixed Income Investments
- Regular Income: Fixed income securities typically pay interest at regular intervals (monthly, quarterly, or annually), offering a consistent source of income.
- Principal Protection: At the end of the investment term (maturity), the principal amount is repaid, provided the issuer does not default.
- Lower Risk: Fixed income securities, particularly government bonds or high-grade corporate bonds, tend to be lower risk compared to stocks, making them suitable for conservative investors.
- Variety of Options: Fixed income investments include a wide range of securities such as bonds, debentures, Treasury Bills (T-Bills), municipal bonds, and certificate of deposits (CDs).
- Diversification: Including fixed income investments in a portfolio helps diversify and balance the risk exposure by complementing more volatile assets like equities.
Benefits of Fixed Income Investments
Corporate Bonds
A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M&A, or to expand business.
Certificate of Deposits
A certificate of deposit (CD) is a savings certificate with a fixed maturity date and specified fixed interest rate that can be issued in any denomination aside from minimum investment requirements.
Treasury Bonds
A Treasury bond (T-bond) is a marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years.
