What are the Advantages of investing in fixed-income products?
A fixed-income investment can provide many advantages for your financial goals.
1. Mitigating market risks
Unlike stocks, fixed income is generally considered to carry lower risk. This is because it's less sensitive to global economic and geopolitical events.
If you're planning on investing a significant amount of your wealth in fixed-income products to help you achieve your long-term goals and retire comfortably, then this type of investment can help minimise the impact of market volatility.
2. Securing Hard Earned Money
Capital preservation is one of the most critical factors you should consider when investing in fixed income. This type of investment can provide a steady income stream and protect your investment from market volatility. However, it's important to note that inflation risk can cause your assets to lose value.
3. Generating Higher Returns
With fixed-income investments, you can get a steady source of income. You can receive a fixed amount of money at regular intervals, and it's tax-free in the case of municipal bonds.
4. Assurance & Attractiveness
Various types of fixed-income products can provide you with attractive returns. You can also increase the risk-reward ratio by taking on more credit or interest rate risk.
Some risks are also involved with Fixed income products, as shown below.
1. Interest rate risk
Rising interest rates can cause bond prices to fall, resulting in the loss of value for your investments.
2. Inflation risk
Another potential risk factor for bond investors is inflation. Investors lose purchasing power if the inflation rate exceeds the income that bonds provide at regular intervals.
3. Credit risk
Another potential risk factor that bonds investors should consider is credit risk. If a company's debt obligations go unpaid, it could cause investors to lose their entire investment. This type of risk is also known as a business risk.
4. Liquidity risk
If an investor wants to sell their fixed-income assets but cannot find a buyer, then this type of risk is known as liquidity risk.
How to invest in fixed-income products ?
Individuals can still choose to invest their money in fixed income through exchange-traded and mutual funds.
Individual investors can buy and sell bonds, but they usually need a lot of assets to achieve a diversified portfolio. Some factors that can make buying or selling bonds difficult are high transaction costs, liquidity issues, and minimum investment requirements.
Connect with our team today if you need assistance in investing in Fixed-Income products.
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