Fixed income securities is the poster child for secure investment options that an investor can rely on. These securities can play a huge role in stabilising the investor’s portfolio despite the state of the market. This makes them a very important asset class that deals in corporate bonds, government bonds and mortgage backed securities. Here are the reasons why you should be investing in fixed income securities.
The name fixed income evolves from from the fact that these securities are designed in such a manner that they will always provide a fixed level of income. This level of stability makes fixed income securities a rather attractive option for investors. Fixed income securities are also required to provide the original invested amount for the investors, so as to eliminate the possibility of sustaining a loss. The concept of capital protection is an integral part of fixed income security schemes as a diversified portfolio that contains fixed income securities is much less likely to sustain heavy losses when compared to an equity portfolio. This of course, comes down to the above mentioned factor of your invested amount coming back to you after the maturation period.
As a Means of Income
Fixed income securities can act as a means of income for an investor because they generate funds on a regular basis through the portfolio’s balance. Certificate of Deposits (CDs), that were introduced in India in 1989 are an important fixed income asset issued by the government of India. These added with bonds and preferred stocks will act furnish sustainable flow of capital through accumulated dividends into the investor’s account. It is a secure method of income generation as you are privy to this form of payments through dividends as long as the issuing authority does not default on the securities you have brought. Since most of these securities are arranged by the government, a default is least likely to happen.
A Class Apart
Compared to normal stockholders of a company, investors who deal in fixed income securities have a higher claim to get their investments back should the company in question go through liquidation or bankruptcy. This preference arises from the fact that fixed income securities offer investments that are both debt and equity issuing. Hence, investors who are in possession of bonds have the most potential to receive their original principal in case of a financial crisis. This makes fixed income securities a very desirable investment instrument. KredX’s invoice discounting marketplace is also a viable investment option. This is because our business model successfully manages to mimic the principal preservation properties that make fixed income securities such an attractive investment option for investors.
Fixed income securities are a very important portfolio building tool that can help your investments have long term security. This should be highly important for investors who are averse to risk as these securities offer the best possibility of neutralising the possibility of money loss.