Fixed Income Producing Investments

Fixed income investments generally pay a return on a fixed schedule, though the amount of the payments can vary. This type of investment can include corporate and government debt securities, leveraged loans, preferred stocks, high yield, and investment grade debt and structured products, such as mortgage and other asset-backed securities. 

One role of bonds in your portfolio in addition to providing income is to smooth out and reduce the volatility of your portfolio. Bonds can provide an additional stream of income in a portfolio, with less risk than individual stocks or stock mutual funds.

The relationship between bonds (fixed income) and stocks is generally inverse and they move in opposite directions. This means that when bond prices increase, stock prices decrease; and vice versa. This effect is usually more pronounced for longer-term securities. 

When it comes to investing and retirement planning, it is important to have a carefully planned mix of bonds as well as stocks, and to diversify your portfolio within those different types of investments. An individual’s circumstances (age, goals, life expectancy, liquidity, income, and risk tolerance) will dictate what the correct course of action will be and what percentage of your portfolio bonds should comprise.