Fixed income investments pay you a predictable, steady stream of income — like a paycheck from your investments. Bonds, Treasury bills, fixed deposits, and corporate debentures are all fixed income. You lend money to a government or corporation, and they pay you interest (coupon) at regular intervals plus return your principal at maturity.
The global fixed income market is larger than the stock market — over $130 trillion. US Treasuries, corporate bonds, municipal bonds, and mortgage-backed securities make up the bulk. Bond prices move inversely to interest rates — when rates rise, bond prices fall, and vice versa. This relationship is the most fundamental principle in fixed income investing.
Fixed income is the backbone of retirement portfolios. A 60-year-old with $1 million in bonds earning 5% receives $50,000 annually — reliable income without selling assets. The trade-off: fixed income returns are lower than equities over the long run (5-6% vs. 10-12%). In India, PPF, NSC, and government bonds offer tax-efficient fixed income options.