Fixed Income

Fixed income is a broad investment category encompassing securities that pay investors fixed or predictable interest payments on a regular schedule and return the principal at a specified maturity date. The asset class includes government bonds (Treasuries, municipals), corporate bonds, certificates of deposit (CDs), money market instruments, mortgage-backed securities, and preferred stocks. Fixed income serves multiple portfolio functions: providing steady income, preserving capital, reducing volatility, and diversifying against equity risk. The global fixed income market exceeds $130 trillion — significantly larger than the global equity market — making it the world's largest asset class. Fixed income is typically less volatile than equities but also offers lower long-term returns. The asset class is sensitive to interest rate changes (prices fall when rates rise), inflation (which erodes fixed payments' purchasing power), and credit risk (potential default). A balanced portfolio commonly allocates 30-60% to fixed income depending on the investor's age, risk tolerance, and income needs.