What is fixed income? Fixed income securities come in different types, the most common of which are bonds. Bonds are debts issued by governments and companies. But unlike bespoke loans, bonds are built in structures that are somewhat standardised so they can be easily traded. Investors often use fixed income, especially bonds, in their portfolios. This is because bonds are safer than other kinds of assets, such as property and shares. The reason they are safer owes to the legal protections that bond holders enjoy. Bond holders get priority over shareholders when it comes to cash flows. That is, companies are legally required to pay interest to bond holders before they can conduct buybacks or pay dividends, which reward shareholders. Companies that fail to meet obligations to bond holders are forced to default. Bond repayments are also non-discretionary. Unlike dividends, companies are legally required to pay coupons and principal on certain dates. What are the benefits of investing in fixed income? ...
Want the latest insights delivered to your inbox?