What is fixed-income investing? Asset types, strategies, benefits - Business Insider

kali9/Getty Imagesreturn, usually by way of set interest payments or dividends.

It's like the difference between placing a standing order to buy a dozen roses each year and planting a rose bush. With the former, you know that you're getting 12 roses — no more, but no less. With the latter, you may get many dozens of roses, but a harsh winter could kill your plant, leaving you with no blooms at all.There are several types of fixed-income investments. Their payouts vary, but the rates all tend to be higher than those of the average savings account.

This has never happened with US Treasuries, which is why they're considered virtually risk-free. Also relatively safe: highly rated, or investment-grade, corporate bonds — usually issued by large, stable corporations. Bond ETFs and mutual funds have a number of different strategies. Some of them mix portfolios of long- and short-term bonds. Others mix low-risk US Treasuries with high- risk but high-yield corporate bonds .

You buy a CD by depositing a lump sum in an account at the financial institution. In layman's terms, you're giving them a loan. The CD earns interest for a set period of time — between six months and 10 years, depending on the CD. When the time's up, you'll get back your initial deposit.Most forms of fixed-income investing don't give you equity, or ownership, in anything. Even corporate bonds function merely as a loan to the company.

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