Fixed Income
Fixed income refers to a broad category of investments that provide regular, predetermined payments, typically in the form of interest, over a fixed period. Common fixed income instruments include government bonds, corporate bonds, municipal bonds, and asset-backed securities. At maturity, investors usually receive the bond’s face value in addition to the interest income.
Key characteristics
Predictable income: Fixed income investments offer steady, scheduled interest payments, making them appealing to income-seeking investors.
Capital preservation: Many fixed income securities are designed to return the original investment (principal) at maturity, helping preserve capital.
Risk spectrum: The fixed income universe spans a range of credit qualities, from low-risk government bonds to higher-risk corporate or emerging market debt.
Fixed income plays an essential role in portfolios:
Stability: Fixed income can help dampen portfolio volatility and provide balance against more volatile asset classes like equities.
Diversification: Including fixed income helps spread risk across asset classes and improves portfolio resilience.
Income generation: Bonds and other fixed income products deliver regular cash flows, which can be reinvested or used as a source of income.
Who invests in fixed income?
Fixed income investments attract a wide range of investors, including conservative investors focused on income and capital preservation, retirees seeking reliable cash flows, and institutional investors looking to balance risk and return across portfolios.