What Are Fixed-Income Investments?


Quick Answer

Fixed-income investments provide returns to investors in the form of fixed periodic payments on a predetermined schedule, explains Fidelity. Certificates of deposit, bond funds and fixed-income exchange-traded funds are common examples of fixed-income investments.

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Full Answer

Since fixed-income investments, known as fixed-income securities, offer guaranteed income, they typically provide investors with a lower return on investment, states Investopedia. Other types of fixed-income investments include mortgage-backed securities, tax-free municipal bonds, investment-grade corporate bonds and U.S. treasuries, cites T. Rowe Price. Another definition for fixed-income investments is loans made by investors to government or corporate borrowers who promise to pay fixed interest until a specified maturity date.

To determine the amount of annual interest earned on a fixed-income investment, multiply the interest rate, known as the coupon rate, by the face value of the security, explains T. Rowe Price. Although the face value and the interest rate on bonds remain fixed, the returns and the yields fluctuate based on interest rate movements in the secondary investment markets. As a rule, T. Rowe Price explains that yields and prices move in opposite directions in the secondary investment markets. Therefore, the total return on fixed-income investments best represents the value of the assets rather than the yields or the coupon rates.

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