By Stephen L. Thomas | October 24, 2023 | In
When it comes to constructing a balanced investment portfolio, one crucial asset class that often takes center stage is fixed income. Fixed income investments, such as bonds, serve as the bedrock of stability, providing a predictable stream of income and acting as a counterbalance to the volatility of equities. In this article, we delve into the role of fixed income and its significance in a well-diversified portfolio. Fixed income refers to investment securities that generate a fixed or predictable stream of income over a specified period. The most common types of fixed income investments are bonds, which are essentially loans made by investors to governments, municipalities, corporations, or other entities. These bonds typically have a predetermined interest rate, maturity date, and regular interest payments. The primary objective of fixed income investments in a portfolio is to preserve capital and provide stability. While equities can experience significant fluctuations in value, fixed income investments tend to offer a higher level of predictability. The regular interest payments and the return of principal at maturity offer investors a level of stability that can help cushion the impact of market