Fixed-income securities are an essential part of many investors’ portfolios. Many consider them a low-risk investment option that provides a steady income stream through interest payments.
Fixed-income securities have many names, with the most common being bonds. When you purchase bonds from a corporation or the government, you lend them your money.
Many types of fixed-income investments are out there, and it is important to know them because they carry different risks and interest rates. Know about them in the next slides.
Treasury bills, commonly known as T-bills, are a type of short-term debt instrument issued by the federal government through the US Department of Treasury.
Treasury notes are government bonds with a maturity date between two and ten years. They pay a higher interest rate because they have a longer maturity compared to other Treasury investments.
Treasury bonds have the longest maturity dates of all government debt, maturing in 30 years.
Inflation-protected securities, or TIPS, offer investors a safeguard against inflation. These bonds provide a fixed rate of interest, but their overall value adjusts in response to changes in the Consumer Price Index (CPI).
Municipal bonds are debt instruments issued by local governments to fund projects. You might see bonds for upgrading sewer systems, building a new school, or repairing roads.