With the recent volatility in the equity markets, fixed income products are back on investors' radar. What exactly are fixed income products? Today we will help you to clarify this concept.
What are fixed income products?
Fixed income products are a financial term for financial products issued with a fixed interest rate, with the aim of avoiding interest rate and exchange rate risks and as a means of increasing the risk of managing economic instability and control. The main purpose is to hedge interest rate and exchange rate risks, to increase the means to manage economic instability and control risk, and to meet the needs of financiers while earning excess returns.
Fixed income, which is the return that investors receive at a pre-determined rate. Products such as treasury bonds, bonds and certificates of deposit, all of which have pre-fixed interest rates and dividends, are common fixed income products. The common feature of these products is that they generally have a definite maturity date and as long as they are held to maturity, they will receive the previously agreed portion of the return.
It is therefore also relatively less risky than equities. Because fixed income products are less risky, the returns are generally not too high and are more stable. Based on these characteristics, it is generally bought by investors primarily to protect against market volatility.
Fixed income is not the same as a defined return.
Given that there is less risk, is the return on fixed income products certain? The answer is no. Fixed income is not the same as certainty and there are inherent risks associated with fixed income products. Because fixed income products have an agreed maturity date and return in advance, some investors will have to pay additional default fees if they pay out early.
There is also the risk that the issuer may default on its obligations. Therefore, when purchasing fixed income products, it is also important to determine your own risk acceptance. If you cannot accept any risk at all, then you will have to keep your money in the bank.
What are the characteristics of fixed income products?
1, The investment period is fixed: generally, one to three years.
2, The income is clear.
3, The risk is low.
What are the fixed income products in a fund?
Generally speaking, we regard money funds and bond funds as fixed income products. Money funds mainly invest in government bonds, bank certificates of deposit and central bank bills, while bond funds mainly invest in government bonds, financial bonds and corporate bonds.
Through the above, I believe you already know the advantages of fixed income products. Compared to equity products, which mainly invest in equities, it is less risky, has more stable returns and can effectively withstand market fluctuations. If you are a prudent investor, fixed income products are one of the first choices.
