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Fixed-Income Securities

Moneyzine Editor
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Moneyzine Editor
1 mins
January 18th, 2024
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Fixed-Income Securities

Definition

The term fixed-income security refers to investments that provide their owners with periodic payments in addition to the preservation of capital if held to maturity. Fixed-income securities provide their holders with a return that is known, in addition to providing a consistent payment schedule.

Explanation

Fixed-income securities are typically valued by investors looking for a reliable source of income as well as the eventual return of their original investment (principal). The security these investments offer their holders usually results in a lower rate of return too. Examples of fixed-income securities include:

  • Bonds: issued by corporations (equipment trust certificates, debentures), municipalities (general obligation and revenue bonds), as well as the U.S. Treasury (savings bonds, treasury notes and bonds); payments are made on a fixed schedule as is the return of principal.

  • Certificates of Deposit: a savings account that features a maturity date and entitles the holder to receive periodic interest payments.

  • Money Market Accounts: a low-risk investment issued by financial institutions, usually consisting of certificates of deposit, commercial paper, and government securities.

  • Annuities: available through a number of financial institutions, annuities guarantee a stream of income for life or a pre-established period of time.

  • Asset-Backed Securities: issued by both financial institutions as well as government agencies, can include mortgages, credit card debt, as well as automobile loans.

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