What is fixed income investing?

Definition and Examples of Fixed Income Investment

Fixed income investment is an investment strategy that focuses on very low-risk investments that pay a steady income. A fixed income investment strategy can be ideal for you depending on your age and financial goals.

How Fixed Income Investment Works

Fixed income investment involves specific objectives that make assets like bonds, money markets, and certificates of deposit the better options. These investments are considered among the safest. Most people with a fixed income investment strategy aim to preserve their capital.

These assets also offer reliable payouts on a fixed schedule. You can count on them as an additional income source. You know exactly how much you will receive and when you will receive it, allowing you to avoid dealing with market fluctuations.

Note: It is still important to have diversification among your fixed income investments.

Advantages and Disadvantages of Fixed Income Investment

Advantages:

• Capital preservation
• Income generation
• Low risk

Disadvantages:

• Inflation risk
• Interest rates may rise
• Default risk

Key Takeaways

Fixed income investment involves investing in very low-risk assets with regular payouts. Retirees are the most dependent on the fixed income investment method. It is a time in life that requires stable and predictable returns. A retiree may rely on income sources that produce the same amount of income year after year. They may also prefer those that increase at a low nominal rate like pensions, annuities, or investment accounts.

Source: https://www.thebalancemoney.com/what-is-fixed-income-investing-2466644