Fixed Income (or Bonds) is not for everyone. Some find it boring, some find it fascinating.
If Equities add risk to your portfolio, Fixed Income tends to reduce the average risk of your portfolio. When you buy Fixed Income you are entitled to receive a stream of cash flows at predetermined dates, usually twice a year. These are called Coupon payments which are guess what, fixed.
Generally speaking, the higher the coupon you receive the riskier the deal. On a similar fashion, the lower the price you pay for a Bond, the higher the implied risk of the deal.
Like for Equities, there are different types of Fixed Income although the logic is the same, you lend money to a company. The company will use the money to do lots of different things at company level, like expanding, buying goods and services, refinancing existing debt etc. Therefore, as an investor you hope that the company will:
make the semiannual coupon payments on time
be able to return the capital you have lent on time, usually on a predetermined date which is the maturity.
As you might have noticed Fixed Income is cool as you can make money in two ways, one is the coupon payment, the other is the return on price.
Although the coupon payments is easy to understand as it is basically a fixed rate on the amount of money you have lent the company, the return on price is dependent on the price you pay and the price you sell.
If you buy a bond and then sell it at a higher price before maturity, then you have made a profit. Alternatively, if you do not want to sell it before maturity, then the bond will be redeemed at par, i.e. repaid in full (hopefully).
Again, Like for Equities there are public and private securities. In general, the private securities require specialised expertise like for Direct Lending, whilst on the public side you can get exposure via publicly listed instruments or Funds like Fixed Income ETF which should be available in any platform.
If you already have Equities in your portfolio, then adding Fixed Income can be a diversifier, which will make your portfolio more stable. This is true as long as the broadly-understood correlation between Equities and Fixed Income remains either low or negative.
The Fixed Income world is very fascinating, and extremely broad. In general the shorter the investment horizon of an investor, the higher the allocation to Fixed Income as it is perceived to be less risky than Equities.
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