Fixed Income

Fixed Income Securities refer to securities such as bonds and preference shares. These instruments provide a return in the form of fixed periodic payments and the eventual return of principal at maturity. Bonds are issued by Government or company. Preference shares are also issued by companies.

An investor stands to earn a return from the interest payment from a Fixed Income Securities investment. The investment also has potential for capital appreciation upon disposal of the security.

An example of a Fixed Income Security is a preference share issued by a corporation with a 6% interest rate and a 8-year maturity period. An investor investing $1,000 in this preference share would receive annual payments of $60, usually paid semi-annually (twice a year), and be returned $1,000 in the eighth year if the preference share is call back

Benefits of Investing in Fixed Income

Diversification

Historically, bonds don’t move in tandem with the performance of stocks. Bonds may appreciate in value while riskier investments such as stocks plunged. The practice of spreading money among different asset class to reduce risk is known as diversification. Provides a predictable income stream If you are retired or not working, knowing how much interest they can expect to receive, how often they’ll receive it, and when their principal will be repaid can be useful. Flexibility Investors can buy and sell fixed income securities easily through a broker anytime during trading hours. Also, fixed income securities can be bought and sold using familiar stock trading techniques such as stop-loss orders, limit orders and margin purchases. Transparency Real-time price and volume information are readily available to all investors on the website. With this transparency, investors can regularly monitor and have up-to-date information on their investments.