Advantages of Fixed Income Investments
How do you save? Of the Americans who save, many choose to simply nurture standard savings accounts that modestly grow each time they make a deposit. Despite the best intentions, however, when money gets tight, contributing to a standard savings account tends to be one of the first places where we cut back.
If you've found yourself in that same situation of depleting your hard-earned savings account contributions time and time again, it may be time to consider an alternative investment strategy.
With fixed income investments, your savings work for you, even when you're occasionally unable to contribute. From anywhere from a few weeks to many years, your savings continue to grow, and you never have to worry about missing a beat.
Sometimes when people think of investments, they think of stocks, which can rise and fall dramatically and require constant attention. Fixed income investments are different. With fixed income investments, the risks are typically much lower. They act as a safe haven that allows your funds to experience continued growth at a much higher rate than a traditional savings account.
Investors can expect a consistent rate of return with their fixed income savings. In other words, the interest rate stays the same for the duration of the investment. If your investment returned 5% every month when you opened the account, it should continue to return 5% every month until it matures.
An investment "matures" after it has accumulated all of its possible interest and is ready to be returned to the owner. The maturity date for fixed income investments is outlined up front and should give you an idea of your commitment time frame. Keep this date in mind because depending on the type of investment, you may or may not be able to withdraw funds before the maturity date without experiencing a penalty.
With smart shopping techniques, you may be able to find a fixed income investment that is just right for you. Examples of common fixed income investments include:
- Certificates of Deposit (CD)
- Money Market Deposit Accounts
- Money Market Funds
- Treasury I Bonds
- Municipal Bond Funds
It's a good idea to find out all the details about any investment before you participate. To get started, you may simply need to look no further than your personal bank, but sometimes digging deeper can help you find a better interest rate with another institution. You can also learn more about the specifics of fixed income investments through the additional resources included within our Personal Finance section.
