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Fixed Income Securities

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What are Fixed Income Securities?

These are the low-risk type of asset class that offers a stream of return on a pre-defined schedule. The rate of return offered on these investments are generally fixed. They are included in the portfolio to offer stability and regular income to the investor. Because of this feature, it is popular among risk-averse investors like the retired public.

What are the different ways to invest in Fixed Income Securities ?

Bank Fixed Deposit:

One of the most preferred investments of all times is a bank fixed deposit in India. This instrument claims to protect the investor’s capital and provide regular income on it. However, the rate of return has become competitive in the last few years, which makes this investment hard to beat inflation.

Corporate bonds:

Similar to the bank FDs, investors can lend their capital to the company in return for enhanced interest rates. In this, there are many choices available from AAA rated to junk bonds depending on the quality. It becomes pertinent for the investor to select quality bonds.

Mutual funds in the form of debt or liquid

The type of mutual fund which invests in the corporate debt or government securities. They provide a much higher interest rate in comparison with bank FDs. Apart from this, an investor can also gain from the bond price appreciation when interest rates fall.

For the short time horizon investors, liquid funds make more sense than debt funds. Here, the funds can be parked for the matching period and earn higher returns.

Arbitrage Funds

The type of mutual fund which invests in the equity market by locking in any visible arbitrage opportunity. This can be done by locking the spot and future price and realizing the yield either by reversing or rolling over the future position.

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What are the benefits of investing in Fixed Income Securities ?

Investors can preserve their capital by investing in such securities. This is the low-risk investment where the invested capital is bound to be returned within a specific time horizon.

These securities also help in creating a steady source of cash flow to the investor. Almost all the products from bank deposits to corporate FDs to debt mutual funds pay a certain amount of fixed return along with dividend rates.

They are positioned higher in the capital structure of a company. This means, in times of bankruptcy, the bond investor will be paid higher in priority than a preferred stock or common equity investor.

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Frequently Asked Questions

What is the difference between stock and equity

What is the difference between stock and equity

What are fixed income securities?

These are the low-risk type of asset class that offers a stream of return on a pre-defined schedule. The rate of return offered on these investments are generally fixed. They are included in the portfolio to offer stability and regular income to the investor. Because of this feature, it is popular among risk-averse investors like the retired public.

How are equity securities different from fixed income?

Equity securities are the type of asset class that invests in the stocks or shares of a company. These are riskier due to fluctuating prices but offer a higher return. However, fixed-income securities are low-risk products that invest in bank deposits, corporate FDs, debt mutual funds, etc. They predefine the interest rate to be paid over the time horizon.

Can you enter or exit fixed-income securities anytime?

Yes, most of such investments are liquid.

How do you define the importance of fixed income in a portfolio?

It provides security, regular income, and diversity to an investor’s portfolio. If all the investments are made in equity, there is a high chance of the portfolio going down altogether when markets crash.

Is investing in fixed-income securities safe?

Yes, they are considered being one of the safest and low-risk investments. Due to this feature, the rate of return is also low compared to other asset classes.

What are the different fixed-income securities?

There are several types of options available while investing in fixed income which includes government securities, fixed deposits, corporate bonds, commercial paper, treasury bills, etc.

What are fixed interest rate security and floating interest rate securities?

The fixed-income securities in which the interest payable to the buyer is pre-decided beforehand. While in floating interest rate securities, the interest payable is reset on regular intervals depending on the benchmark rate.

What are coupon payments?

The coupon is the percentage of the face value provided to the security buyer at regular intervals.

What are commercial papers?

They are the short term borrowing securities issued by corporates, financial institutions, and other market players.

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Blogs

What are the different ways to invest in fixed-income securities?

Bank Fixed Deposit: One of the most preferred investments of all times is a bank fixed deposit in India. This instrument claims to protect the investor’s capital and provide regular income on it. However, the rate of return has become competitive in the last few years, which makes this investment hard to beat inflation.C....

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Top 9 fixed income securities in India

The investors vary in market fluctuations and seeking fixed returns are best suited to invest in fixed-income securities. The Indian government along with corporates have been supportive enough to create multiple options of such characteristics to fulfill the required needs.  The below-mentioned products are....

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What are Fixed Income securities? Who should invest?

The instruments provide a defined cash flow periodically in return for the investment. The organization (government or private) issued these securities treat them as a liability to be paid. Along with the interest rate, the final value is also known to the investor at the time of investment.      &n....

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Disclaimer The information contained in this file is provided for informational purposes only, and should not be construed as legal advice on any matter. The content and interpretation of the law addressed herein is subject to revision. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this file to the fullest extent permitted by law. Every effort is made to avoid errors. In spite of that, errors and discrepancies may creep in. It is expressly stated that neither Findoc Investmart Private Limited nor any of the contributors of updates will be responsible for any damage to anybody on the basis of this document. Readers are, therefore, requested to cross check with the original sources e.g. Government publications, Orders, Judgments etc., before taking any action or making any decision. These services are being provided through our group companies Findoc Capital Mart Pvt Ltd and Findoc Finvest Private Limited

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Important Message The information contained in this file is provided for informational purposes only, and should not be construed as legal advice on any matter. The content and interpretation of the law addressed herein is subject to revision. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this file to the fullest extent permitted by law. Every effort is made to avoid errors. In spite of that, errors and discrepancies may creep in. It is expressly stated that neither Findoc Investmart Private Limited nor any of the contributors of updates will be responsible for any damage to anybody on the basis of this document. Readers are, therefore, requested to cross check with the original sources e.g. Government publications, Orders, Judgments etc., before taking any action or making any decision. These services are being provided through our group companies Findoc Capital Mart Pvt Ltd and Findoc Finvest Private Limited

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