investing

fixed income

Investments that provide a regular, predetermined return, such as bonds and certificates of deposit.

Example

“Retirees often shift to fixed income investments for predictable monthly income.”

Memory Tip

FIXED income — the income amount is FIXED. You know exactly what you'll get.

Why It Matters

Fixed income investments are crucial for building a stable financial foundation because they provide predictable cash flow regardless of market conditions. This makes them essential for retirement planning, emergency funds, and conservative investors who prioritize capital preservation over growth.

Common Misconception

Many people believe that fixed income investments have zero risk, but this is incorrect. Fixed income securities still carry risks such as inflation eroding purchasing power, interest rate changes affecting bond values, and issuer default risk if the organization cannot repay.

In Practice

Suppose you purchase a 10-year bond with a face value of 1000 dollars that pays 4 percent annual interest. You would receive 40 dollars every year for 10 years, then get your 1000 dollars back at maturity, giving you completely predictable returns regardless of whether stock markets rise or fall during that period.

Etymology

Fixed (predetermined) + income (money received) — income that is fixed in advance.

Common Misspellings

fixed incomfixd incomefixed incmefixed incomme

More in investing

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appreciationAn increase in the value of an asset over time.…bondA fixed-income investment where an investor loans money to a…diversificationA risk management strategy that mixes a wide variety of inve…dividendA payment made by a corporation to its shareholders, usually…expense ratioThe annual fee that mutual funds or ETFs charge investors, e…hedge fundA private investment fund that uses advanced strategies — in…

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