Research Guides: Fixed Income Securities (Bonds): About (2024)

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Research Guides: Fixed Income Securities (Bonds): About? ›

Fixed Income Securities (Bonds): About

Fixed-income securities are debt instruments that pay a fixed rate of interest. These can include bonds issued by governments or corporations, CDs, money market funds, and commercial paper.

Fixed Income Research Definition: In fixed income research, finance professionals analyze companies' debt issuances and make pricing and investment recommendations based on their outlook for each one.

Fixed-income securities usually have low price volatility risk. Some fixed-income securities are guaranteed by the government providing a safer return for investors. Cons: Fixed-income securities have credit risk, so the issuer could possibly default on making the interest payments or paying back the principal.

Fixed Income Investing Strategies – Types

The laddered bond portfolio investing strategy, commonly referred to as bond ladder investing, focuses on diversifying the portfolio by purchasing fixed income securities with different maturity dates in a ladder-like fashion, i.e., low to high rung-like fashion.

While the risks of individual bonds will vary, fixed income is usually seen as a lower risk than stock market investment. Many investors choose to buy government bonds for their perceived safety and predictable returns.

This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Unlike stocks, bonds aren't publicly traded on an exchange. Instead, bonds are traded over the counter, meaning that you must buy them from brokers. However, you can buy U.S. Treasury bonds directly from the government.

While a fixed income trader's salary can vary widely depending on geographic location and the hiring firm, Glassdoor estimates place the average salary at $169,976 per year, with a low salary of $127,000 and a high salary of $238,000.

Can fixed-income investments lose money? ›

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

Fixed income investing can be a particularly good option if you're living on an actual fixed income and looking for ways to maximize your savings. And if you're worried about the potential wild ups and downs of the stock market, fixed income investing can help you sleep a bit better at night.

Equity funds are pooled investments that primarily invest in stocks and offer the potential for higher returns, but they have more risk. Income funds, meanwhile, focus on generating regular income through investments in fixed-income securities like bonds or the money market. 1 They are also used to mitigate risk.

India takes the top spot. The world's most populous country owed $38.3bn to the WB at the end of 2022, down by almost $1.5bn from a year earlier. India's outstanding balance is almost double that of the next biggest debtor, Indonesia, with $20.6bn.

Fixed-income securities provide investors with a stream of fixed periodic interest payments and the eventual return of principal at maturity. Bonds are the most common type of fixed-income security. Different bonds have different term lengths depending on how long the issuer wishes to borrow for.

The time value of money is a financial concept that holds that the value of a dollar today is worth more than the value of a dollar in the future. This is true because money you have now can be invested for a financial return, also the impact of inflation will reduce the future value of the same amount of money.

Securities recap

Equity securities are financial assets that represent shares of a corporation. Fixed income securities are debt instruments that provide returns in the form of periodic, or fixed, interest payments to the investor.

Unlike stocks, bonds aren't publicly traded on an exchange. Instead, bonds are traded over the counter, meaning that you must buy them from brokers. However, you can buy U.S. Treasury bonds directly from the government.

We generally think of the term "fixed income" as synonymous with bonds. In reality, a bond is just one type of fixed income security. The difference between the money market and the bond market is that the money market specializes in very short-term debt securities (debt that matures in less than one year).