Risk and Return Involved in Fixed-Income Investment Strategies

1. Risk and Return Involved in Fixed-Income Investment Strategies If you wish to grab some stable returns from your investments, incorporating a fixed-income investment strategy is the way to go. It involves investing in low- risk securities that provide fixed interest or part of profits for a specified time period and, on maturity, repays the principal amount. Different entities regulate the issue and trade of fixed income securities. For example, the securities issued by the bank are looked after by the Reserve Bank of India. On the other hand, SEBI is responsible for the regulation of non- government securities. To build an effective fixed-income investment strategy, you must know the details of various investment options to include. Let us dig into the details. Types of fixed-income investments There are a variety of fixed-income investments. Let us have a look at some popular investment options: Exchange-Traded Funds Exchange-Traded Funds (ETFs) are baskets of securities that you can buy and sell on the stock exchange on a daily basis. These funds are linked with indices like Nifty and Sensex. Exchange-Traded Funds can be of assets like equity, bond, or even gold. Their trade values depend on the NAV of the particular

2. asset. For instance, the value of a gold ETF is linked with the actual value of gold. Similarly, the value of a bond ETF moves in sync with the value of the bond. Debt Funds Debt funds are a way to invest in corporate bonds, Government securities such as treasury bills, and other money market instruments including commercial papers and certificates of deposit. The investment in these debt securities has a predetermined maturity period. The ‘fixed income’ comes in the form of interest that is assured from the time you put your money in. However, even though debt funds offer good returns, they are not guaranteed. Nonetheless, you can easily predict the return and make the investment accordingly. This is what makes this a safe mode of investment for the conservative investor. Money Market Funds Money market funds are a category of mutual funds. As the name suggests, these schemes mainly invest in money market instruments. As per the rules determined by SEBI, it is necessary for these schemes to invest in market instruments with a maturity of up to one year. Money market instruments mainly include treasury bills, certificates of deposit, commercial papers, repurchase agreements, etc. These schemes are suitable for those people who want to take minimal risk with their investments. Being short-term investments, these are not affected much by the interest rate changes. The low-risk factor associated with money market instruments makes investing in them relatively safe. Senior Citizen Savings Scheme Learn more about the fixed-income investment options on the TejiMandi app. Now that you have a better idea of where to put your money, let us see the Benefits That Fixed-Income Securities Offer in Terms of Risk and Return.