Profiting From Fixed Income Investment
What is Fixed Income Investment?
Investment is a business strategy that comes with a risk, but there investment with reduced or minimal risk. Fixed income deposits are also known as bonds. Government and private organizations are also investments that may issue out bonds for interested individuals to invest in. They are paid back a regular interest called a coupon.
Fixed Income?
Fixed income is a special investment with minimal risk whereby there is a balance conservancy in the capital and profit or income. This kind of investment simply allows investors to invest a fixed deposit or amount under an agreed time and fixed or interest rate.
Mostly, People practice fixed income investment because of its reduced risk. This kind of investment majorly produces a fixed inflow of cash with a high and low fluctuation at regular intervals, and it is one dependable way to get financial freedom.
An illustration of fixed-income investments is when an investor invests 200,000 naira, which he or she does not have access to for an agreed period, for example, one year. After one year, he or she has access to this money with a percentage interest.
Fixed Income Portfolio
A fixed income portfolio secures an investment that pays the investor an agreed and fixed interest until it grows, after which the investor receives the principal amount of investment security. Certificates of deposits (CDs), Treasury bills, bonds, and mutual funds, typically low-risk securities with an ascertained interest, are embodied in the fixed income portfolio.
How to Invest in Fixed Income Investment
Understand Fixed Income suitability:
Fixed-income investment is for those who do not want a high-risk investment with low returns. It is more suitable to invest in government debt securities than private securities. Also, investors must understand the terms and conditions or investment prospectus before signing in for any investment.
Emergency Fund:
Creating an emergency means giving investors access to their finds in emergency cases.
This has to do with a proper understanding and aligning your investment period to your convenience. Investors should avoid investing in securities above their time limit or horizon. For example, door a time frame of 30 months investment. One of the things to consider is to include some months of unavoidable expenses in an emergency fund. This will help you thrive well in the investment process because, in fixed investment, investors are not given access to their funds for a while, and if it must be done, it is accompanied by a penalty. This is why investors must start with setting up an emergency fund.
It is also recommended that investors place their emergency funds on money market funds because high returns are guaranteed.
Managing Interest Rate
Managing interest rate in fixed income investment helps with interfering conditions like inflation risk and when there is a decline in the interest rate. If this occurs, the way out is to utilize a ladder strategy in order to buy a debt fund. For example, An investor who makes N4 million in an investment space of four years can invest in a staggered six-month investment by dividing the N4 million into lots of N800,000. In the course of this, possible decisions can be taken if there is an increase or decrease in the rate. This step also helps to reduce loss.
· Practice Credit Rating
Credit rating is a yardstick for measuring debt securities. High credit rating depicts low returns, and low crediting depicts high returns.
In Nigeria, there are security and exchange commissions firms which include the possibility of returns for every investment
E.g. of such firms are:
· Agusto & Co Ltd
· Datapro Ltd
· Global Credit Ratings Co Ltd
Fixed Income Investment in Nigeria
Most financial firms or banks in Nigeria carry out fixed-income investments services. The difference is their terms and conditions, which vary from bank to bank.
Some Nigerian rules that govern this kind of investment is an :
An investment window of one month to one year.
An average of 100,000 nairas to kick start.
Deductions of tax fee from percentage commission.
If an investment continues until the agreed time, the investor gets the money made only during that period.
Requirement for Fixed-Income Investment in Nigeria
· Age. At least 18years of age.
· A valid means of identification
· Form filling.
· Your utility bill, e.g. electricity bill, rent receipt
· Customer care assistance
Fixed Income Investment in Other Countries
In the UK, fixed investment rates can be bought in divisions within a period of 48 months and most government bonds are bought with a minimum investment rate of £100, and this can be done online via a debt management portal.
In the US, it takes about $200,000 in investible funds. There is a high return of interest noticed when the currency is depreciating, and people take vantage of this as a way to make money from fixed-income investment funds. This means that one’s ability to gain or lose is dependent on the currency rate.
Why You Should Invest in Fixed Income Investment
A good reason for this kind of investment is its lower risk and steady returns throughout the investment period.
Conclusion
Investing in fixed-income investments should be given a second thought to build income generation. It profits the governments, private firms and individuals. Great business personnel and even retirees are recommended to engage in this.
