{"id":25530476,"date":"2022-06-26T23:27:58","date_gmt":"2022-06-26T17:57:58","guid":{"rendered":"https:\/\/entri.app\/blog\/?p=25530476"},"modified":"2022-06-26T23:27:58","modified_gmt":"2022-06-26T17:57:58","slug":"what-is-fixed-income-security-types-of-fixed-income-securities","status":"publish","type":"post","link":"https:\/\/entri.app\/blog\/what-is-fixed-income-security-types-of-fixed-income-securities\/","title":{"rendered":"\u00a0What Is Fixed-Income Security? Types of Fixed-Income Securities\u00a0"},"content":{"rendered":"

\u00a0<\/strong>A fixed-income security is a financial investment plan which provides a fixed amount of return to its holders, here the investors get returns at set intervals of time and a principal amount at its maturity. Governments, corporations, and other entities issue these instruments to finance their operations. Fixed-income securities are popularly known as Debt-instrument.<\/p>\n

Types of Fixed-Income Securities<\/strong><\/h2>\n

Fixed-income instruments are offered by Governments and Corporations to raise capital. It provides investors a return in the form of fixed-time payment and the eventual return of principal at maturity. An investor can choose different types of fixed income securities based on risk-factor, interest rates, and liquidity risk.<\/p>\n

\u00a0<\/strong>Fixed Deposits(FDs)<\/strong><\/h3>\n
    \n
  • Fixed deposit (FD) is one of the safest investment options, which provides high-interest rates and investors get an assured sum of money at the end of the maturity period.<\/li>\n
  • The interest rate depends on the type of lenders including the public sector, private sector, and small finance banks.<\/li>\n
  • Investors can choose the tenure according to their convenience.<\/li>\n
  • Fixed Deposits are usually two kinds:-Bank Fixed Deposits(FDs) and Company Deposits(CDs)<\/li>\n
  • Bank Fixed Deposits are offered by Private or State banks, which provides lower interest rate and a high level of security to the account.<\/li>\n
  • Companies and financial institutions offer Company Deposits with high-interest rates.<\/li>\n
  • The interest rate on FDs ranges from 5.5 percent to 8.5 percent. It will help investors to save taxes on deposits for 5 years and more.<\/li>\n<\/ul>\n

    Recurring Deposit(RD)<\/strong><\/h3>\n
      \n
    • A Recurring Deposit(RD) is an investment option, wherein an investor can deposit small amounts every month for a fixed period.<\/li>\n
    • An investor can decide on the amount and tenure accompanied by other benefits.<\/li>\n
    • More flexible as they allow fixed monthly investment compared to the one-time installment required for an FD.<\/li>\n
    • The interest rate is from 4 percent to 8 percent.<\/li>\n<\/ul>\n

      Bonds<\/strong><\/h3>\n
        \n
      • A bond is a loan from an investor to borrowers such as a company or government.<\/li>\n
      • Bonds are issued by the Government and large companies, to raise funds to finance projects and business growth.<\/li>\n
      • Investors purchase bonds at face value, which is returned at the end of fixed tenure.<\/li>\n<\/ul>\n

        Bonds can be divided into three according to their maturity, as follows:<\/h4>\n
          \n
        • Bonds issued with maturity periods below five years are called short-term bonds. (1-3 years)<\/li>\n
        • Intermediate-term bonds are also known as medium-term funds. The maturity period of mid-term funds is longer than short-term. (3-10 years)<\/li>\n
        • Long-term bonds have a maturity of more than 10 years. (more than 10 years)<\/li>\n<\/ul>\n

          Fixed Maturity Plan or FMPs<\/strong><\/h3>\n
            \n
          • Fixed Maturity Plans or FMPs are closed-end debt funds with a maturity time that can range from 1 to 5 years. It usually invests in certificates of deposits(CDs), commercial papers(CPs), corporate bonds and bank fixed deposits.<\/li>\n<\/ul>\n

            Post Office Monthly Income Schemes<\/strong><\/h3>\n
              \n
            • The Post Office Monthly Income Scheme is a risk-free guaranteed scheme offered by the post offices in India.<\/li>\n
            • It is one of the popular investment schemes, as it can be started with a nominal account.<\/li>\n
            • People can open a Post Office MIS account with Rs 1000 and in multiple of Rs 100.<\/li>\n
            • The scheme offered two types of deposits:-Single account and a Joint account. A minimum of Rs 4.50 lakh can be deposited in a single account and 9 lakh in a joint account. In a joint account, each joint holder has an equal share in the investment.<\/li>\n
            • The investment tenure of the scheme is five years. The current interest rate offered by the POMI scheme is 6.6% per annum.<\/li>\n<\/ul>\n

              Treasury Bills or T-Bills<\/strong><\/h3>\n
                \n
              • Issued by the Central government needs money for a short period.<\/li>\n
              • The maximum maturity period of Treasury Bills is 52 weeks.<\/li>\n
              • It is also considered as government bonds or debt securities with maturity of less than one year.<\/li>\n<\/ul>\n

                Repurchase Agreements<\/strong><\/h3>\n
                  \n
                • A temporary transfer of securities in exchange for money.<\/li>\n
                • Known as repos or buybacks.<\/li>\n
                • The buyer will be charged the interest rate to buy the security is called the Repo rate.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

                  \u00a0A fixed-income security is a financial investment plan which provides a fixed amount of return to its holders, here the investors get returns at set intervals of time and a principal amount at its maturity. Governments, corporations, and other entities issue these instruments to finance their operations. Fixed-income securities are popularly known as Debt-instrument. Types […]<\/p>\n","protected":false},"author":105,"featured_media":25530490,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[802,246],"tags":[],"class_list":["post-25530476","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","category-banking"],"acf":[],"yoast_head":"\n\u00a0What Is Fixed-Income Security? 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