Fixed Income Investments

Shawn Plummer

CEO, The Annuity Expert

Investing in fixed income can be an excellent strategy for those looking to generate a steady income stream and reduce portfolio risk. However, in today’s uncertain economic climate, it’s essential to understand the ins and outs of fixed-income investments to make informed decisions that align with your financial goals. This guide will explore fixed income, the types of securities available, and how you can benefit from incorporating them into your investment strategy.

What is Fixed Income?

Fixed income is investments that pay a predetermined interest rate, typically in bond coupons or dividend payments. These investments provide a consistent source of income and are generally considered lower risk than stocks or other growth-focused assets.

Fixed Income Securities

Definition of Fixed Income

In simple terms, fixed income is an investment that pays a fixed rate of return over a specified period. The income generated by these investments is often used to supplement retirement income, fund expenses, or provide financial security during market downturns.

Fixed Income vs. Equities

While both fixed and equities can generate income, their risk and return profiles are the primary difference. Fixed-income investments typically offer lower returns with less volatility, while equities have the potential for higher returns but with greater risk. Nevertheless, the stability and predictability of fixed income make it an attractive option for investors seeking to preserve capital or balance a more aggressive investment strategy.

Fixed Income Markets

The vast and diverse fixed-income market offers investors many options for generating income and diversifying their portfolios.


Bonds are perhaps the most well-known type of fixed-income investment. They are debt securities governments, municipalities, and corporations issued to raise capital. In exchange for the capital, the issuer promises to pay the bondholder periodic interest payments and coupons and return the principal amount at maturity.

Government Bonds

National governments issue government bonds which are typically considered low-risk investments. Examples include U.S. Treasury bonds, German Bunds, and Japanese government bonds (JGBs).

Municipal Bonds

State or local governments issue municipal bonds to fund infrastructure projects or other public initiatives. They often have tax advantages for investors and can be either general obligation bonds or revenue bonds.

Corporate Bonds

Corporate bonds are issued by companies looking to raise capital for operations, expansions, or other purposes. These bonds range from high-quality, investment-grade bonds to high-yield or “junk” bonds with higher risk and potential for higher returns.

Fixed Income Funds

Fixed-income funds are investment vehicles that pool investors’ money to purchase a diversified portfolio of fixed-income securities. These funds can invest in bonds, preferred stocks, and other income-generating assets, providing an accessible and convenient way to invest in fixed income.

Mutual Funds

Mutual funds are professionally managed investment vehicles that pool money from multiple investors. Fixed-income mutual funds can focus on specific bond types, credit qualities, or maturity ranges, offering various investment options.

Exchange-Traded Funds (ETFs)

ETFs are similar to mutual funds but trade on stock exchanges like individual securities. Fixed-income ETFs can track specific bond indices or follow active strategies, providing investors with a transparent and cost-effective way to invest in fixed income.


Annuities are considered fixed-income products because they provide a predetermined and consistent income stream over a specified period or for the investor’s lifetime. 

Certificates Of Deposit (CDs)

Certificates of Deposit (CDs) are fixed-income products because they offer a fixed interest rate over a predetermined term. When you invest in a CD, you agree to deposit your money for a specific duration, and in return, the issuing bank pays you interest.

Benefits of Fixed Income Investments

Fixed-income investments offer numerous advantages, making them a popular choice for investors of all types.

Regular Income

The periodic interest payments from fixed-income securities can provide a steady and predictable source of income, making them ideal for retirees or investors seeking supplemental income.


Adding fixed-income investments to a portfolio can help diversify and balance risk, as they typically have a low correlation with stocks. This means they can help reduce overall portfolio volatility during market downturns.

Capital Preservation

Fixed-income investments are generally considered lower risk than equities, making them suitable for investors looking to preserve capital or reduce their exposure to market volatility.

Inflation Protection

Specific fixed-income securities, such as Treasury Inflation-Protected Securities (TIPS), can help protect against inflation by adjusting the principal and interest payments based on changes in the Consumer Price Index (CPI).

Next Steps

Investment fixed income offers many opportunities for investors looking to generate regular income, preserve capital, and diversify their portfolios. You can make informed decisions that align with your financial goals and risk tolerance by understanding the various types of fixed-income securities, the fixed-income market, and the benefits these investments can provide. As with any investment, it’s crucial to carefully consider your options and consult a financial advisor to ensure you choose the most suitable fixed-income investments for your unique needs and objectives.

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Frequently Asked Questions

Can you provide information on the types of government bonds that are issued?

The United States Treasury has five types of marketable securities available: Treasury Inflation-Protected Securities (TIPS), Treasury Bills, Treasury Bonds, and Floating Rate Notes (FRNs), Treasury Notes.

What are the three types of fixed-income investment?

Examples of fixed-income investments include bonds, bond mutual funds, and certificates of deposit (CDs). An investment strategy that utilizes fixed-income products is known as the ladder strategy.

Is Social Security a fixed income?

While Social Security payments may increase or decrease due to cost of living adjustments, the amount of monthly payments, once you start receiving them, is considered fixed. This is because pensions, like Social Security, are also classified as fixed income.

What are some examples of fixed income?

Different investment options include bonds, savings bonds, GICs, treasury bills, BAs, NHA MBS, strip coupons and residuals, and a laddered portfolio.

Is fixed income a good investment?

Although fixed-income investment is less risky than investing in stocks, it still has risks that investors should be aware of. To reduce these risks, it is recommended to diversify your investment portfolio.

How do you live on a fixed income?

One way to live on a fixed income is by living below your means. It’s essential to micromanage your budget and avoid adding new debt. It would be best to consider moving to a smaller place for tax savings and downsizing. Finally, try having fun for free and earning extra money on the side.

What is the risk in fixed-income securities?

Fixed-income securities face a range of risks due to market unpredictability. These risks include interest rate, credit, reinvestment, call/prepayment, inflation, liquidity, exchange rate, volatility, political, event, and sector risks, all of which can affect the securities’ cash flows and market value.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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