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Fixed Income | May 09
What are Fixed Income securities? Who should invest?

The instruments provide a defined cash flow periodically in return for the investment. The organization (government or private) issued these securities treat them as a liability to be paid. Along with the interest rate, the final value is also known to the investor at the time of investment. 

                                                                          Characteristics

1. Taxation: The short-term capital gains are taxed based on the investor’s tax slab and income while the long-term capital gains are taxed at 10% and 20% with and without indexation respectively.

2. Focus: The primary objective of such investments is not seeking higher returns but protecting the principal amount by yielding a fixed return. Another important goal fixed income achieves is by stabilizing the returns in the fluctuating markets.

3. Comparison: While comparing the different types of fixed income instruments, historically ETFs have always performed better than debt funds due to its equity linked investment schemes. However, the money market funds best suited for the short-term parking of funds do not yield a better return.

4. Liquidity: One of the most important features of fixed income investment is the high liquidity attached. The investor can access their complete fund in a matter of a short time. 

5. The portfolio that consists of fixed income is actively managed by the fund manager to adjust as per the changing market interest rates and dynamics. 


Who Should Invest in Fixed Income?

Investors looking for a safe investment tool for investment that is not much affected by the changing market conditions. Also, the avid investor can choose to put a relatively smaller percentage of their portfolio in such instruments to diversify and ensure stable returns. Apart from these, the senior citizen also looks for such avenues that are low in risk and provide fixed returns.

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