A fixed-income portfolio includes investment securities that pay interest at a fixed rate until maturity. Certificates of deposit (CDs), treasury bills, and government-issued bonds are types of fixed-income securities. They're usually low-risk with pre-established interest.
Fixed-income investing techniques include bond ladder investing. This technique concentrates on diversifying a portfolio by acquiring fixed-income securities of varying maturity dates in a ladder-like manner. Such a diversified portfolio reduces risk and gradually gains in value as a result of bonds that mature in a staggered manner—usually between one and four years.
Bullet bond portfolio investing involves creating a portfolio by acquiring fixed-income securities at varying dates but with similar maturity dates. It enables diversification of a portfolio while working to ensure favorable future returns.
Barbell bond portfolio investing involves creating a portfolio with only short-term and long-term bonds. This strategy's most important characteristic is focusing on the portfolio's short-term bonds and reinvesting their returns after maturity. A barbell portfolio short-term bond has a maturity of below or equal to five years while long-term bonds mature in a decade or more.
A fixed-income portfolio is valuable in facilitating diversification. Moreover, diversification enables the stability of the investment portfolio against price corrections and volatility. This characteristic brings equilibrium where a part of the portfolio undergoes difficulty.
Fixed-income securities also offer profitable returns at a steady rate. With equities, fixed-income securities typically present a lower risk.
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