What Is Fixed Income Investment?

Fixed income investing is a particular investment strategy that primarily focuses on relatively low-risk investments that earn consistent returns. The most preferred form of investment will vary based on one’s financial goals and age.

Some of the most popular fixed-income investments include money market funds, bonds, mutual funds, bonds, blue-chip stocks, certificates of deposit (CDs), etc. These investments earn through pre-scheduled and periodic coupons or dividends payments. For instance, those looking forward to a reliable income source can invest with Exchange Traded Funds through Lyxor ETF. Read on to find out more about this investment strategy.

How Does Fixed Income Investing Work?

First and foremost, this is one of the safest forms of investing, as it focuses on capital preservation. For the conservative lot, this is their most preferred form of investment. Be it CDs, bonds, annuities, etc. the fixed-income investment you choose will primarily be based on your individual financial goals.

Moreover, these investment strategies offer reliable payouts on a fixed schedule; hence you can count on them as an additional income source. The investor knows how much to expect, and the date they will be credited. You no longer have to deal with volatility and uncertainties which come with it.

Pros and Cons of Fixed Income Investments

Even though the fixed income strategy is excellent for investors focusing on capital preservation, it might not be a one size fits all. Here are some of its pros and cons.

Pros

  •   It’s a low-risk investment.
  •   It’s a reliable income-generating venture.

Cons

  •   It suffers the risk of inflation.
  •   Annual interest rates might rise. 
  •   Risk of default.

All in all, retirement is the main contributing factor for going the fixed income investing way because it’s a point in life where getting a stable and predictable return becomes essential. With fixed account investments, it’s vital to diversify your fixed-income investments. Thus, retirees may rely on diverse fixed-income investment plans such as pensions, annuities, social securities, etc.