Fixed Income Security

Finding ways to invest for a more reliable income or making sure you have your retirement income ready when you need it ready as well as having an additional source of retirement income beyond your employer-sponsored 401k are good strategies. Being diversified means you have reduced risk and if you want to stay away from riskier investments fix-income securities can be an option for you.

Fixed Income Securities

Fixed-income securities pay out over a period of time. Fixed-income securities are an affordable choice for many people; though your returns are limited to the rate of security once it matures. There are securities that are not fixed and can pay a variable amount, but there are more risks involved.

Investment that are Fixed-Income

The most stable and known type of fixed-income investment is the U.S. Treasury Bond. They are backed by the U.S. government and are a solid investment for your money. There are other bonds you can invest in as well such as corporate bonds, tax-free municipal bonds, and international bonds.

There are other fixed-income securities that can be invested in that are not bonds or securities. Money market investment funds and pay fixed income rates depending on the types of securities you purchase. All of these will pay you a fixed interest rate for the set period which makes them safer than other types of equities.

The price of a fixed-income security is set and will not move around on you and you can figure out how much money it will have once it matures. The part you will get is the price that equals the percent plus the original investment; if your bond increases then the yield decreases.

Buying fixed-income security means you are buying it at the purchase price. The interest will be compounding at set periods of time until it matures then you can get your principal back plus and interest it has gained during that time frame.

Fixed-Income Securities and their Risks

Investing in stocks means you will have no guarantee on the return on your investment. You don’t even know if you will get back the money you put in. Fixed-income securities are less risky because you are guaranteed your investment back. There are risks, but they are a lot lower:

• Inflation:  If inflation occurs then your initial investment does not look that impressive. Not only does your ability to purchase diminish so does the amount of interest you will receive from your initial investment.

• Interest Rates: Interest Rates rise and the price of bonds falls. If you are already holding a bond you are not affected because it already  assured at the rate it was set at, but you are unable to purchase new bonds with higher yield rates if your money is not mature enough to be reallocated into a bond that will yield you more money before the interest rates move again.

• Price: This type of security has a time stamp that can be anywhere from upwards of 10 years so if you wait for the correct time frame you will get the full price of it back; though if you find yourself needing money and have to sell that security you run the risk the bond is not worth as much as when you purchased it.

• Exchange Rate: A foreign country can provide fixed-income securities. The problem with this is the rate of exchange of currency changes over time so if the foreign country’s currency falls you will lose money though if it increases more than the dollar than your security is worth more.

• Credit: The company or government that issues the security runs the risk of default and your initial investment and any future returns are lost when the default occurs. This is not expected to happen with a U.S. Treasury Bond, but any lesser grade bonds or companies are a risky investment. Junk bonds are more of a credit risk through the can yield good returns if you want the risk.

Fixed-income securities can provide you with the vision of what you invest as well as what you will get after the waiting period are over. There is little risk in them and unless the bank defaults or are almost guaranteed income. They are a perfect tool for secure investments and an easy place to start your own investing or a way to end it when you are elderly and do not have the same time frame to make money and you need what you have to be secure.

Final Thoughts

Investing early and late in life are good ways to get money coming in, but when you are either relatively new to investing or have reached your golden years you should go for securities that are guaranteed so you won’t have to suffer early losses or potentially lose your entire retirement. Fixed-income securities are a perfect low-risk way to do this. There are several different types available for you to learn about and try your hand at.

Before you begin your investment, you should research your options and make sure you know where you want to put your money and for what duration. If you will need the funds in the future you will want to hold on to that money until you have the funds to do your investing. Part of investing is choosing the right place to invest the money that will work for you and diversifying your accounts as you go.