Fixed-income investment is a type of investment that gives investors a regular and periodic fixed income through dividends or interest until it matures. You can get back the principal amount along with the dividend or interest on the maturity of the investment. Fixed investments are popular among seniors and retirees as it guarantees returns and carries less risk. Their assured income is not affected by any upheavals in the market.

Know more about the types of fixed-income investments and tips on investment strategies.

Benefits of a fixed-income investment
Fixed-income investment is ideal for seniors and retirees as it carries less risk than stocks. Since seniors know the exact earnings, they can plan their expenses accordingly. It also helps preserve the capital invested, as you get the amount invested at maturity. If seniors need additional income, they can invest a portion of their investment portfolio in higher-risk fixed-income products that may carry a higher credit risk. These products generally provide higher returns.

Types of a fixed-income investment
The most common and popular products are government bonds, also referred to as treasury securities. Other important fixed-income investments include:

Treasury Bills
These are securities that mature within one year, and it does not pay coupon returns. Also known as T-Bill, they are issued at a price lesser than their face value. When it matures, you can redeem it at its face value; the difference is your return on investment.

Treasury Notes
These are similar to Treasury Bills and are medium-term securities. You can purchase them in multiples of $100 for two, three, five, seven, and ten years. The interest is calculated as semiannual payments, and the principal is paid at the end of the maturity period.

Treasury Bonds
Also known as T-bonds, they are long-term securities issued for 20 and 30 years. You can purchase these bonds in multiples of $100.

Municipal Bond
Popularly known as “muni,” these bonds are issued by the government and backed by a county, municipality, or state. These bonds are issued to fund local projects and expenses. Most state governments offer tax benefits for investors who buy municipal bonds.

Treasury Inflation-Protected Securities (TIPS)
These are fixed-income investment bonds offered by the government. The bonds offer protection against inflation, meaning that the principal rises due to inflation and decreases with deflation. They also offer only modest returns as interests. When you invest in TIPS, you get your interest twice a year.

Corporate Bonds
A corporate bond is another type of fixed-income investment product. Companies sell these bonds to investors with a commitment to pay an assured interest on the principal. They have a maturity period of one to 30 years. They are popular as they offer more interest than government bonds but carry a higher risk. There are many types and categories of corporate bonds. Categories are based on the company’s market sector that issues it or the type of security backing it gets. Some corporate bonds can also be issued without security backing, and they carry a high risk. Public utilities, transportation, industries, banks, and financial institutions are the major sectors that issue corporate bonds.

Certificate of Deposit (CDI)
These are short-term, typically less than five years, fixed-income investment products offered by financial companies. They are popular as the interest rate is higher than what you can earn from a traditional savings account.

Junk Bonds
They are high-income bonds typically issued by companies with a high risk of default. If the companies are struggling financially, they issue these bonds to attract more investment quickly.

Investing in fixed-income investment using a laddering strategy
Many consider fixed-income investing a safer and conservative investment strategy as it involves investing in low-risk securities that offer probable but reliable interest. If you are keen to build an investment portfolio of bonds, or mutual funds, there is a strategy called laddering, which you can also apply for fixed-income investments. In a laddering strategy, you can receive a fairly steady cash flow by planning your investments so that your securities mature during different periods. When you invest in short-term bonds, and it matures, you can re-invest, and in this manner, you also have a pulse on the market when interest rates change.

Investing in fixed-income investment through mutual funds
While a person’s risk tolerance relatively reduces as they age, there are many options to diversify an investment suitable for seniors. Fixed Income Mutual Funds have been gaining traction as they are ideal for moderate investors with a steady fixed income. All your money will be pooled together to buy other securities, and in the case of balanced funds, you can own both stock and bonds. Liquid funds and debt mutual funds have decent returns and are also low-risk. You can assess your financial goals and the cost of the funds before making an investment decision.

In all, fixed-income investments are beneficial investing options. However, it is recommended to read the fine print before signing any document. If you still need additional guidance, consult a finance professional.