A fixed income investment strategy focuses on protecting your capital while generating steady income from it. Usually this is realized through a portfolio heavily weighted toward dividend stocks.
However, if you prefer investments with even lower risk, options include a variety of fixed income investments, including money market funds, bonds, bond mutual funds and ETFs, certificates of deposit (CDs) and annuities.
If your investment goal is long-term asset growth to fund your retirement or reach other objectives, equity investments would normally comprise the largest portion of your portfolio. This is a very effective strategy during bull markets but, to protect against market corrections or extreme volatility, allocating some resources to fixed income assets can potentially mitigate any losses.
Fixed income assets produce steady income paid at regular intervals. In the case of bonds, these are referred to as “coupon” payments. The amount of annual income varies according to the asset and the issuer’s potential risk of default.
Generally speaking, fixed income assets present less risk than stocks. They tend to be less affected by outside factors such as global political events and overall economic downturns, but not completely.
Bonds in particular have an interest rate risk that runs counter to stocks. When bank interest rates are high, the stock market tends to perform poorly but bond yields tend to increase. A related risk is that bond yields can, in exceptional times, be lower than the annual rate of inflation, effectively reducing the purchasing power of the income generated.
Many fixed income markets have minimum investment requirements. Because EM Braxton Universal represents many clients, we can provide you with access to a broad range of fixed income asset funds with different risk profiles. Our team of knowledgeable professionals can evaluate and select assets that are best suited to your unique financial circumstances.