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Fixed Income

Fixed income refers to investments that provide regular, set interest payments over a specific period, along with the return of principal at maturity. Common fixed-income instruments include bonds, treasury bills, and certificates of deposit (CDs). Fixed income is favored by conservative investors seeking stable, predictable returns and lower risk compared to equities. These investments are crucial for diversification, income generation, and capital preservation in investment portfolios.

Example

An investor buys government bonds, receiving regular interest payments every six months until maturity, when the principal amount is repaid, providing a steady income stream.

Key points

• Provides regular, fixed interest payments and principal repayment at maturity.

• Includes bonds, treasury bills, and CDs.

• Offers lower risk and stable returns compared to stocks.

Quick Answers to Curious Questions

It provides diversification, reduces overall portfolio risk, and generates steady income, making it a key component of balanced investment strategies.

Rising interest rates typically reduce the market value of existing bonds, while falling rates increase their value, influencing investment returns.

Risks include interest rate risk, credit risk, and inflation risk, which can affect the purchasing power of fixed interest payments.