Fixed income.

[Caliscotsman]

I often see the term 'fixed income' investing?
I'm not quite certain if I understand what that means?
Would appreciate some input.

[CAsage]

Generally and vaguely - bonds and interest earning cash. Specifically, not stock.

https://www.bogleheads.org/wiki/Debt_security

[arcticpineapplecorp.]

equites are stocks
real estate is housing
commodities are raw materials or primary agricultural product that can be bought and sold, such as copper or coffee
fixed income is an investment that pays a set amount of interest or dividends over a specific period of time. At the end of the period, the investor receives the original amount they invested back.

so if you buy a bond that is a contract; you lend money and they agree to pay you x amount of interest for the duration of the bond and at the end of the duration when the bond matures you get your principal back.

but often people refer to different things as fixed income:
bonds (corporate or government or municipal)
CDs
MYGAs
savings accounts
money market funds
annuities

fixed income usually is lower risk, lower returns than investments that are higher risk, higher return, like stocks.

does that help?

https://www.investopedia.com/terms/f/fi ... curity.asp

[SnowBog]

The "fixed" comes from getting a known return (at least for a time).

• Your checking account currently pays x% interest...
• Your savings account currently pays x% interest
• A 3-month Treasury currently pays x% interest
• A municipal bond currently pays x% interest
• A corporate bond currently pays x% interest

To by clear, they all pay different interest amounts...

The concept is the same with bond "funds", which hold multiple individual bonds. https://www.bogleheads.org/wiki/Individ ... _bond_fund

Fixed income is usually considered "safer" investments. Absent the bond issuer going bankrupt, you'll get your money back plus interest.

However, it's usually the case that "fixed income" barely beats inflation. So it's not a great way to build up retirement savings. For long-term growth, most people use "equities" (aka stocks, such as a Total Stock Market fund).

Most people tend to have more "equity heavy" investments as they grow their wealth, then switch to more "balanced" or "fixed income heavy" portfolios as they near retirement. This is reflected in a person's Asset Allocation, that is the % allocated to "equities" (stocks) vs. "fixed income" (bonds). https://www.bogleheads.org/wiki/Asset_allocation

However, having some bonds even early on can be advantageous for many. Invariably we will have a stock market crash, which can be really hard for people to see their life savings get crushed. If one has the proper Asset Allocation, reflecting their need, ability, and willingness to take risk, they are more likely to shrug off such crashs. "Fixed income" helps as it generally isn't going to "crash" like the market, often might even increase in value of people "seek safety" in bonds (increase demand), and can be used to "rebalance" your Asset Allocation - which generally decreases the time to recover after a crash.

[Beensabu]

Fixed income is cash, CDs, bonds, etc. It's essentially getting paid regular interest on money you've lent out (to the bank via deposit, the government, corporations, etc.) with the expectation you will eventually get that money back at a predetermined point plus the interest paid on it along the way.

[Caliscotsman]

Thanks all!