what is fixed income 
fixed income refers to those types of investment securities that pay investors fixed interest or dividend payments until they mature at maturity investors are repaid the principal amount that they originally invested government and corporate bonds are the most common types of fixed income products unlike equities that may pay no income to investors or variable income securities where payments can change based on some underlying measure such as short term interest rates the payments of a fixed income security are known in advance and remain fixed throughout its term in addition to purchasing fixed income securities directly investors can choose from a variety of fixed income exchange traded funds etfs and mutual funds to buy investopedia mira norianunderstanding fixed incomecompanies and governments issue debt securities to raise money to fund day to day operations and finance large projects these fixed income instruments pay a set interest rate return in exchange for investors lending their money at the maturity date investors are repaid the original amount that they invested this amount is known as the principal for example a company might issue a 5 bond with a 1 000 face or par value that matures in five years the investor buys the bond for 1 000 and will not be paid back until the end of the five years over the course of the five years the company makes interest payments called coupon payments based on a rate of 5 per year as a result the investor is paid 50 per year for five years at the end of the five years on the maturity date the investor is repaid the 1 000 they invested initially investors may also find fixed income investments that make coupon payments monthly quarterly or semiannually fixed income securities are recommended for conservative investors seeking a diversified portfolio the percentage of the portfolio dedicated to fixed income depends on the investor s investment style an investor might also choose to diversify their portfolio with a mix of fixed income products and stocks creating a portfolio of for example 50 fixed income products and 50 stocks treasury bonds and bills municipal bonds corporate bonds and certificates of deposit cds are all examples of fixed income products each of these products has unique benefits and limitations as investments types of fixed income productsas stated earlier the most common example of a fixed income security is a government or corporate bond bonds trade over the counter otc in the bond market and secondary market the most common government securities are those issued by the u s government and are generally referred to as treasury securities fixed income securities are offered by non u s governments and corporations as well here are common types of fixed income products traditional portfolio theory holds that an efficient investment strategy that attempts to balance risk and returns should diversify in stocks and bonds stocks tend to be riskier with higher potential returns while fixed income securities are safer with usually lower returns 