Have you ever wondered if there are any advantages of fixed income investment? If so, then you’ll find this article interesting. The focus of this article will be centered on the advantages of fixed income investment, such as Capital 3PM. Read on to find out more.
Many people are familiar with the term “fixed income investment”, but only a few know what it actually is. Just as the name suggests, it is an investment where the investor is given a fixed income in the form of interests or dividends over a given period. This fixed income given to the investor is known as coupon payment. Fixed income investment is majorly centered on the preservation of income and capital. This type of investment carries less risk compared to some other types of investment.
Fixed income investment comes with a lot of advantages for investors. Some of these advantages include the following:
1. Income Generation
One of the major advantages of fixed investment is steady income generation. Investors are given a fixed sum of money at regular intervals. In some cases, the income is exempted from tax. This makes it a very good form of investment for older people who are retired and need a regular source of income.
2. Carries Less Risk
Unlike stock that carries high risk, fixed income investment carries less risk. If you are looking for an investment that doesn’t have many risks, then you should consider fixed income since macroeconomic factors don’t affect it much.
3. Priority Given During Liquidation
When a company is in the process of liquidation, investors with fixed income are given more priority over others. That means those with fixed income would be paid first before the shareholders.
4. It’s a Safe Deal
Fixed income investments, are very safe. Usually, in this type of investment, the securities have a particular date of maturity when the principal amount will be given back to its investors. This is something that is already decided when the securities are issued out. So, one thing is certain; the investors will always get their principal amount invested.
Types of Fixed Income Investment
Investors have options in this type of investment. You can choose anyone you prefer most. Some of the common types of fixed income investments are as follows:
- Bonds: This type of investment allows government or companies to borrow money from you. This gives you a steady interest from the government or the company until maturity.
- Money Market Funds: These funds also offer investors a steady flow of income. However, the returns are usually very low.
- Certificates of Deposit: This is also called CDs for short. These are savings accounts where you save money for a given period at a fixed interest rate.
- Others: Some of the other types of fixed income investments are fixed-rate annuities, corporate bonds, municipal bonds, etc.
Fixed Income investments are a lot safer compared to other options. Also, it gives you a steady flow of income within a given period. This makes it a perfect option for older people that have reached retirement age.