Definition of 'Fixed Income'
There are many different types of fixed income investments available, including bonds, Treasury bills, and certificates of deposit. Bonds are a type of debt security that is issued by a company or government. When you buy a bond, you are lending money to the issuer, and they agree to pay you back with interest over a certain period of time. Treasury bills are a type of short-term debt security that is issued by the U.S. government. They are considered to be one of the safest investments available, and they typically pay a lower interest rate than bonds. Certificates of deposit are a type of savings account that is offered by banks and other financial institutions. When you deposit money into a CD, the institution agrees to pay you back with interest over a certain period of time.
Fixed income investments can be a good way to generate income and build wealth over time. However, it is important to understand the risks involved before investing in any fixed income security. These risks include interest rate risk, inflation risk, and credit risk. Interest rate risk is the risk that the interest rate on your investment will change, which could cause the value of your investment to decrease. Inflation risk is the risk that the prices of goods and services will increase, which could also cause the value of your investment to decrease. Credit risk is the risk that the issuer of your investment will default on their payments, which could cause you to lose all of your investment.
If you are considering investing in fixed income, it is important to speak with a financial advisor to learn more about the risks and rewards involved.
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