The Fixed Income Funds are a popular investment choice, whose characteristics differ from that of the shares and other assets and therefore, adding them to your portfolio can offer favorable results but, only after knowing certain basic things about them.
What is it?
The fixed income funds own the fixed-income securities such as the government bonds, municipal bonds, corporate bonds and so on and therefore, favorably come with lesser risks. The returns you enjoy from them are fixed and therefore, favorable for conservative investors and people nearing their retirement period.
Popular fixed-income securities
As the name implies, these are bonds issued by the municipalities of the specific states and cities, in the idea of securing funds for certain infrastructure projects like highway construction, bridge construction and so on, Therefore, the duration of the bonds can last from few months to many years, accordingly. Purchasing the bonds can benefit the high marginal taxpayers, as the interest paid is mostly, tax-free.
Certificates of Deposit
By purchasing these bonds, actually, you are favoring the bank by allowing them to use your money for their loan funding needs. That is why you are here offered with a high interest that also comes with the fact that your money is being locked or kept away from you for a longer period of time.
Investment-grade corporate bonds
These bonds are issued by high-grade corporations to secure money for their various significant activities. When you purchase these bonds, along with enjoying the stated amount of interest on the scheduled date, you can also spread your risks, as you have the access to choose from the diversified choices of corporate bonds.
International Fixed Income Funds
Indeed, these are bonds issued by the foreign entities and therefore, depending upon the value of the involved currencies, you could gain maximum benefits, favorably.
Following are the significant benefits enjoyed by the investors choosing the Fixed Income Funds.
This bond is designed in such a way as to offer steady income to the investors that too on the scheduled dates and therefore, can suit anyone and everyone in favor of it.
Certain fixed income bond types like the Municipal Bonds and Treasury securities, allow the investors to enjoy some tax exemptions, whose benefits and limitations depends upon the individual bond types.
One need not worry about the capital when they choose to invest in one of the fixed income bond types because the capital is paid back to you on the future predefined date, as promised. This is very true in the case of ‘Certificates Of Deposit and the Treasuries!