Fixed income securities is a kind of investment that results in the generation of fixed returns usually in the form of eventual return of principal at maturity and interest payments to investors. With the other income securities, the returns changes are dependent on many factors such as the growth of the issuing company or short-term interest rates. However, you are familiar with the fixed income security payments in advance. But here are a few things that can be helpful to some extent. Scroll down to know in detail.
· Bonds
A bond is the most common type of fixed income security. A bond is essentially an IOU issued by a local municipality, federal government, or the corporation in order to finance activities or projects. In case you buy a bond, you will extend a loan to the bond issuer for a certain period of time. In exchange for the loan, the issuer will pay you a certain interest rate which is called as coupon rate, and that too at regular intervals until the bond reaches its maturity period. Higher will be the risk in case of higher coupon rates. As the bond gets matured, the issuer has to repay the loan and you will be receiving the full face value or the par value of the bond.
· CDs and Preferred Stocks
Certificates of deposit (CD’s) are also a fixed income security that will pay regular interests whereas the in case of preferred stocks, the payments are made in the form of fixed dividends.
All these things do come at some price. Fixed income investments usually have lower rates of return in comparison to the variable income securities other investments. This is the reason why fixed income securities are famous amongst the risk-averse investors. And it is very important that you know about the fixed income investment process in detail.
The life spans are usually longer in today’s life and the general lacks saving for the retirement. Most of the financial advisor's advice to start with the number 120 or even 110 before subtracting your age so as to attain the perfect stock percentage for your portfolio. This approach aids you to keep your money in the stock market for a longer period of time. So it is obvious that you will be having a better chance of being financially prepared throughout retirement.
