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An investment strategy known as "fixed income" focuses on earning returns from fixed-interest assets including bonds, certificates of deposit (CDs), and preferred stock.Â
Regular monthly payments to investors over a certain period of time, such as interest or dividends, are what define fixed-income securities. This is in contrast to equity securities, such as stocks, where returns are produced through capital appreciation and dividends, which can change based on the success of the company.
Since fixed-income instruments provide a more stable income stream and are frequently supported by the issuer's creditworthiness, they are typically less hazardous than stocks and other types of investments. In contrast to equities, they could potentially have lesser potential returns. Investors looking for a steady income stream, portfolio diversification, and risk management frequently employ fixed-income investments. Therefore, interest rate risk and inflation risk can both be controlled with fixed-income instruments.
Since fixed-income instruments provide a more stable income stream and are frequently supported by the issuer's creditworthiness, they are typically less hazardous than stocks and other types of investments. In contrast to equities, they could potentially have lesser potential returns. Investors looking for a steady income stream, portfolio diversification, and risk management frequently employ fixed-income investments. Therefore, interest rate risk and inflation risk can both be controlled with fixed-income instruments.
