Fixed Income Investments
Fixed Income Investments are ideal for a steady, stream of returns over predetermined time periods.
Besides traditional fixed income investments there are several such investment opportunities through alternative investments now accessible to residents of Ontario.
Fixed Income Investments
Although they usually offer single digit returns, fixed income investments have several advantages. Many are relatively low-risk investments that provide a steady income for a predetermined period. Many are tax-exempt or tax-deferred. Fixed income investments can be used to diversify portfolios.
During periods of financial crisis or when interest rates are dropping, these investments may offer a relatively steady rate of return as compared to other financial ventures.
The main disadvantage of these investments is that the capital is tied up for a fixed period.
Fixed Income Funds
There are several types of traditional Fixed Income Investments, including:
Annuities – Money invested for a fixed time period, during which you are guaranteed a check every month. Penalties are charged if you want to withdraw funds before the maturity.
Municipal Bonds – The minimum investment is usually large and they offer a specific yield after a designated period. Used by the government to fund public projects.
Certificate of Deposit (CD) – Investment offering fixed return. Useful for time-specified plans.
Money Market Accounts – Higher minimum balance and interest rates as regular saving plans. You can, however, withdraw a specific amount per month.
Treasury Bills (T-Bills) – Fixed-interest government debt security. Interests paid semi-annually. T bills are the safest type of short-term debt instrument issued by a federal government. Ideal for investors seeking a 1- to 12- month investment period, T-bills are highly liquid and very secure.
Guaranteed Investment Certificates (GICs) – GIC is a low-risk investment issued by a trust company or bank and has a fixed yield and term. The Canada Deposit Insurance Corporation (CDIC) insures many GICs for interest and principal that total up to $100,000. GICs are only redeemable at the end of the term.
Banker’s Acceptances (BAs) – BAs are short-term promissory notes issued by a corporation. The notes are accepted and guaranteed by a major Chartered Bank. BAs offer higher quality and liquidity than most commercial paper issues and the yields are superior to Treasury Bills.
NHA Mortgage-Backed Securities (MBS) – A National Housing Act (NHA) MBS combines the features of residential mortgages and Canadian government bonds. MBS investors receive monthly income that includes both mortgage principal and interest payments from a pool of mortgages.
There are several types of fixed income investment plans
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