- Stability and Predictability: Fixed-income investments, such as bonds, provide a steady income stream over a specified period. This can make them particularly useful for conservative investors who need a reliable income or those in retirement.
- Lower Volatility: This lower risk can attract more risk-averse investors.
- Capital Preservation: As long as the issuer does not default, fixed-income investors can expect to get their initial investment back at maturity, which is essential for individuals who cannot afford to lose principal.
- Diversification: Fixed-income securities often perform differently than equities in various market environments, diversifying an overall investment portfolio and reducing risk.
- Income During Deflation: In deflationary economic conditions, fixed-income investments can generate excellent actual returns because the fixed-interest payments increase purchasing power.
- Remember, though, that fixed-income investments also come with their share of risks, such as interest rate, credit risk, and inflation risk. Investors must consider these factors and their tolerance for risk before choosing between fixed-income and equities.
"Bonds are subject to market and interest rate risk if sold before maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price." "There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk."