What are fixed income instruments ?

Fixed income or debt instruments are very limited risk instruments which pay an interest on the principal to the instrument holder.

The interest can be paid quarterly, semi-annually or at annual intervals

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#fixedincome #debt

These instruments have a maturity period at which the capital or deposit is returned to the investor.

The interest payments are guaranteed by and become a liability of the issuer.

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#deposit #maturity

Typical fixed income instruments include:

- Fixed deposits offered by banks/other institutions

- Bonds issued by the Government of India

- Bonds issued by Government related agencies such as HUDCO, NHAI, etc

- Bonds issued by corporate’s

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#bonds

Due to the inherent low risk involved in these instruments, the returns are also minimal and are recommended for "extremely risk averse" investors for "wealth protection".

This doesn't mean that these instruments are risk free.

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#wealth #risk

The risks involved are :
- Inflation risk
- Interest rate risk
- Liquidity risk
- Credit Default risk

Notwithstanding these risks, fixed income instruments are the safest investment havens out there and one must diversify their portfolio into these.

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#risk #safe

Most retail investors in India have a huge portion of their wealth locked in fixed income instruments like Bank FDs, Post Office Schemes etc.

If you're also doing so, you should consider investing into other FI instruments, equity, etc.

Hope you liked this thread

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