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& #39;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& #39;re also doing so, you should consider investing into other FI instruments, equity, etc.

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