Fixed income is an investment focused on the preservation of fixed capital and income. It can offer a steady income with less risk than stocks. Fixed income products are one of the most common forms of fixed-income investment in individual bonds which also include bond funds, Post Office Savings Schemes, Company deposits, certificates of Deposit, exchange-traded funds (ETF), and money market funds.
Fixed Income products can provide a predictable source of income, often with lower risk than other investments. Along with stocks and stock mutual funds, fixed-income investments make up the backbone of a well-diversified investment portfolio which can be grown day by day if you have the time as well as the belief.
Fixed income derivatives
- Interest rate derivatives
Interest Rate Derivative (IRD) is a financial derivative contract whose value is extracted from one or more interest rates, prices of interest rate elements, or interest rate index.
- Credit derivatives
A credit derivative is a contract whose value depends on the worth of credit. Credit derivatives include credit default swaps, collateralized debt obligations, total return swaps, credit default swap options, and credit spread forwards.
Features of Fixed Income Products-
- Fixed income is the investment in assets and securities that pay out a set level of money to you, typically in the form of fixed interest or dividends.
- Government and corporate bonds are the most common types of fixed-income products.
- Fixed income products pay a fixed amount of interest rate credited to investors.
- At maturity for many fixed income securities, you will be repaid the principal amount invested in addition to the interest they have received.
- At the time of the company’s bankruptcy where you have invested, fixed-income investors are often paid before common stockholders.
Benefits of Fixed Income Products-
- Fixed income carries lower risk than stock market investment.
- Capital preservation means protecting the absolute principal value of your investment amount.
- Fixed income investments can help you generate a steady source of income.
- Fixed income assets offer the potential to generate attractive returns with the flow of time.