The key to developing a sound portfolio is striking the right balance between potential reward, risk, and your future financial needs. To do this, you need a variety of investment vehicles. If you choose to include fixed income securities in your portfolio, there are four key points to keep in mind:
- Most fixed income securities offer a relatively safe and predictable income flow; the amount of interest the issuer has agreed to pay is set at issuance and remains "fixed" until maturity.
- While fixed income securities generally do not offer the potentially high returns of other investments, you are usually spared most of the volatility common in other markets.
- There are a number of fixed income vehicles available, each one offering a range of credit ratings and maturities. This diversity helps improve your management of risk.
- Fixed income securities provide the flexibility and liquidity needed to structure a portfolio tailored to your specific investment objectives.
Naturally, no investment is risk free. It is always a good idea to consult your financial professional before making any investment decisions; he or she can help you decide whether fixed income securities belong in your portfolio.