Q1. What is fixed income investment?
They offer regular or periodic gains to the investor. These are made for a pre-defined period of time and gain an expected profit. Depending upon economy variation, the returns in these are influenced and are low to high risk prone.
Q2. Which are some of the popular options available?
There are several options available in the market. Depending upon investor’s financial goals, duration and risk-taking ability, they can choose from corporate bonds, Mutual funds, fixed-income security, treasurys, high-yield bonds etc.
Q3. What all factors should be considered before becoming a fixed income investor?
There are mainly two types, the first one are more prone to interest rate risks and it includes corporate and municipal bonds, treasuries etc. These are known to perform better when the economy is slowing down. Whereas the other type is at a higher credit risk and performs better when the economy is growing. Such fixed income options include floating rate bonds, high yield bonds etc.
Interest rate risks are affected by any possible change in absolute interest rates during the period if investing while credit risk occurs in high-yield bonds which are susceptible to economic slowdown.
Q4. How should I ensure a minimal-risk fixed-income investing?
- Diversify: Looking for new options and staying updated can open doors to better investing and hence, better profits. Several low-risk options like peer-to-peer lending are being introduced to provide people with enormous gains on the capital, without making a huge investing.
- Choose the right option: Seeking advice from someone who has been investing for a long time can save you from the risk of making wrong investments that do not match your financial goals.
- Define your goals: Set up a plan for your financial goals and identify it as a short, mid, or long-term plan. Depending upon the type of investment you wish to make, look for options in the market that can serve your needs and help you create wealth.
Q5. What are some general tips to gain profit from fixed income investment?
- Don’t be in a hurry: Intelligent investing demands thorough analysis of every option available to you, and then making a decision. This way, you will not miss out on any other possible option which is better than the one you plan to invest in.
- Avoid unnecessary division: Making multiple investing at a time to save tax, and to gain some extra-interest is actually trapping yourself as you may not access the money when needed. .
- Know your limits: Start small. Investing a bigger sum in the beginning can turn against you and put you in a situation. Be clear about what amount of money can be invested without risking any of your fixed expenses. This is crucial because investing money from your regular expense can prevent you from building your portfolio consistently.
Q6. How should I decide on duration?
Duration is mainly affected by the risk associated with it. Floating rate pay-off well in long-term. They include mutual funds, corporate bonds etc. On the other hand, fixed interest rates are more suitable for short-term. Some of these are PPF, FD etc.
Q7. Why should I invest in fixed income?
Current Indian economy aims at creating opportunities for fixed income investors. But choosing the right plan is tricky. Depending upon the amount and duration, you can choose from several lucrative options like mutual funds, corporate bonds etc to grow your money in the best way possible. But getting adapted to the market requires experience and perseverance.
Q8. What should I know before becoming a fixed income investor?
Investing with a broader perspective and a well set long-term plan can earn you enormous gains. But defining your goals, noting down your expenditure and the sum that can be invested, with proper guidance, can earn you benefits of a long-term investor. Also, be open to taking risks and after evaluating the possibilities, you can also invest in some of the new-age options like PPF, Peer-to-Peer lending etc and grow your money.