Fixed Income Bonds
Fixed income bonds are those bonds that pay a fixed interest to the investor. These bonds also repay the principal when the bond matures. Fixed income bonds are perfect for those investors who are looking for regular and fixed income that could further add to their earnings. |
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A good example of a fixed income bond is a government bond that pays a 5 percent interest and has a maturity period of 10 years. This means that if an investor invests $1,000 in this bond, he would get an annual interest payment of $50 and his principal amount of $1,000 would be repaid to him in the tenth year.
Usually fixed income bonds are issued by the government, and they can have a maturity period ranging from one year to ten years. It is important to note that these bonds have a lower return compared to other types of bonds.
When an investor buys fixed income bond, he is basically lending money to the bond issuing company in turn for the regular interest payments. And, the investor will get back his principal when the bond matures. The interest rate is fixed when the bond is being issued by the company, and this rate will not change irrespective of how the interest rate fluctuates in the market. The only time the investor is affected by the change in the interest rate in the market is when he decides to sell the bond before the maturity date.
Generally fixed income bonds offer a predictable income, they are considered safe investments and are not affected by the market trends or the interest rate fluctuations. Therefore, any investor who is looking for these benefits from his investment should opt for fixed income bonds.
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