Submitted by nsscadmin on
Our Financial Literacy Month blogs about investing basics continue this week with a look at fixed-income securities.
Fixed-income securities are debt instruments. When you purchase a fixed-income security you are essentially loaning your money to a government or a company with the expectation that they will return your principal investment plus interest at a certain time. Many fixed-income security investments are low risk and as a result may provide a lower return when compared to stocks. You can obtain potentially higher returns by purchasing higher risk investments, but with added risk comes increased chance of loss.
The most common fixed-income securities are bonds. Bonds can be issued by the government or a company with a set interest rate and a set term or maturity date. You are loaning the government or company money in return for interest on top of your principal at the end of the bond’s term. The terms of certain bonds can differ so make sure you understand them and how they may affect the interest payments before any bond purchase.
In a previous blog post we looked at some of the pros and cons of investing in fixed-income securities.
Before making any investment always make sure it fits your investment goals and risk tolerance. While investing for retirement is important, make sure you properly balance the investments you’re making and your risk to ensure it does not negatively affect your current standard of living and put you on the right path to reach your financial goals.