Fixed Income
What Is Fixed Income
Fixed income investments are financial instruments that offer regular and predictable income with relatively lower risk compared to equity investments. These include bonds, treasury bills, fixed deposits, and debt mutual funds, where investors earn returns mainly through interest payments. Fixed income options are generally less affected by market volatility, making them suitable for conservative investors or those seeking capital preservation. They help provide stability to an investment portfolio and can balance risk when combined with equities. Fixed income investments are ideal for short- to medium-term goals, income generation, and investors looking for steady and reliable returns.
Types Of Fixed Income
1. Corporate Fixed Deposits
Corporate fixed deposits are investment instruments offered by companies to the public for a fixed tenure at a predetermined interest rate. They function similarly to bank fixed deposits but usually offer higher returns to attract investors. The tenure can range from a few months to several years, providing predictable and regular income. However, corporate fixed deposits carry higher risk compared to bank FDs, as returns depend on the financial strength and creditworthiness of the issuing company. They are suitable for investors seeking stable returns with moderate risk and who carefully assess company ratings before investing.
Who It Is For
- Conservative investors
- Income-seeking individuals
Benefits
- Higher returns than bank FDs
- Fixed income visibility
2. 54EC Bonds
54EC bonds are capital gains tax-saving bonds issued by government-backed institutions such as NHAI and REC under Section 54EC of the Income Tax Act. They allow investors to save long-term capital gains tax arising from the sale of property or other eligible assets by reinvesting the gains within six months. These bonds have a fixed lock-in period of five years and offer relatively low but stable interest rates. Interest earned is taxable, but the invested capital gains are exempt from tax. 54EC bonds are suitable for investors prioritizing tax savings and capital protection.
Who It Is For
- Investors with long-term capital gains
Benefits
- Tax exemption on capital gains
- Government-backed issuers
3. RBI Bonds
RBI bonds are government-backed investment instruments issued by the Reserve Bank of India on behalf of the Government of India. They are designed to provide safe and secure investment options with assured returns, making them ideal for risk-averse investors. These bonds typically offer fixed interest rates and pay interest at regular intervals, such as half-yearly. Since they are backed by the government, the risk of default is extremely low. RBI bonds often come with a fixed lock-in period and limited liquidity. They are suitable for investors seeking capital safety, steady income, and long-term financial stability.
Who It Is For
- Safety-first investors
Benefits
- Sovereign guarantee
- Regular interest income
4. Sovereign Gold Bonds
Sovereign Gold Bonds (SGBs) are government-issued securities that allow investors to gain exposure to gold without physically holding it. The value of these bonds is linked to the market price of gold, and investors earn a fixed interest rate, typically paid semi-annually, in addition to potential capital appreciation from gold price movements. SGBs have a fixed tenure, usually eight years, with an option to exit after the fifth year. They are backed by the Government of India, making them a safe and secure investment. SGBs are suitable for investors seeking long-term wealth preservation, diversification, and hedging against inflation.
Who It Is For
- Investors looking for gold exposure
Benefits
- No storage risk
- Interest + gold price appreciation
Returns vary based on changes in gold prices, meaning investment value can rise or fall with market movements.