A fixed-income security is an investment that provides regular, fixed interest payments and the eventual return of the initial capital at maturity.
Bonds are the most common type of fixed-income security, though they also include others such as Treasury bills and certificates of deposit.
If you are wondering what a bond is, go and see our other Finance 101 all about bonds.
Fixed-income securities are generally considered lower-risk compared to stocks as they offer predictable income streams and capital preservation.
It can be a particularly useful investment option for those in retirement or nearing retirement, seeking stability.
These securities can not only provide a reliable source of income, but also diversify a portfolio and reduce overall risk.
By including such fixed-income securities into your portfolio, you can find a balance between the growth potential of equities with the safety of more stable investments, achieving a well-rounded investment strategy.
That being said, no investment is without risk, and you may find a fixed-income portfolio may not be as safe as you might think.
This is why it is important to be aware that all investments come with risk, no matter how low-risk it may claim to be.