The fixed income portfolio is an investment portfolio that allows its owners, who can be one or more persons (natural or legal), obtain a profit based on their level of equity. It is characterized by grouping fixed income financial securities.
The fixed income portfolio includes assets with relatively stable returns over time. Therefore, the investor faces less uncertainty compared to other options such as the stock market.
Fixed income portfolio assets
The fixed income portfolio is mainly composed of the following assets:
- Fixed-term deposits: The user transfers part of his capital to a financial institution for a specified time. At the end of that period, you receive the refund of the money plus interest.
- Treasury Bills: These are debt securities issued by governments. The investor acquires them in exchange for the payment of interest plus the return of their money in a period that can range from three to eighteen months.
- Bonds: Private and state entities issue these titles to raise capital and finance their operations. The institution pays the creditor for the interest earned, for example, every month. Likewise, it repays the capital normally invested at the end of the indebtedness period.
- Fixed income funds: Investment funds that invest exclusively in fixed income instruments.
Fixed income portfolio earnings
The fact that the portfolio is fixed income does not mean that investors will receive the same returns in all periods. However, what is certain is that they are exposed to less risk compared to equities (stocks).
Various factors determine the profitability of an asset. Regarding the debt that companies issue, for example, the payment is not always fixed. The latter happens in bonds with variable coupons, where the interest rate varies depending on the performance of a market indicator such as Euribor or Libor.
In addition, there is always the possibility that the issuing company will face financial problems to meet the payment to its creditors.