Advantages & Disadvantages of Fixed Income Securities

Advantages & Disadvantages of Fixed Income Securities

Fixed income generally means an investment asset whereby one gets returns on an assured rate. Fixed Income Securities can range from bonds, CODs (certificates of deposits), money market funds, etc. that guarantee predetermined returns. They preserve the documents for a particular amount of time and give assured returns (usually lower) and upon maturity gives an impressive amount.

How to Make Investments in Fixed Income Securities?

Fixed Income Assets can be released as government bonds or treasury that can help the investor get the assured returns for a limited amount of time. It can be monthly, semi-annually or annually for a specific interest rate. For example, if an individual invests in a bond for a specific amount of period, he gets the monthly your annual interest as well as the face value at the end of that period.

Among fixed income assets, corporate bonds, treasury bonds, treasury bills, certificates of deposits and municipal bonds are most popular. All these bonds range from a minimum 2 to 30 years, and pay interest semi-annually or annually. Investment-grade bonds are low risk and low interest rate returns, while highly-yield bonds or Non-investment grade bonds are prone to higher risk and returns ensuring more responsiveness.

Advantages & Disadvantages of Fixed Income Securities

Though Fixed Income Securities provide steady returns on different types of bonds, it has some disadvantages also. Let’s find the viable advantages and disadvantages that may help you understand the investment goals of your Fixed Income Securities.


  1. Risk Reduction: As fixed income assets provide lower risk compared to equities, it reduces the risk of investment in the assets. Therefore, it is beneficial for first-time buyers who are not prone to many risks.
  2. Volatility: It is less volatile than other traditional marketing funds. So, it doesn’t fluctuate constantly with the changes in the market.
  3. Principal Amount: Here the investor in any market conditions gets the assured principal returns. So, it is more beneficial to get the benefits of the assets without loss.
  4. Portfolio: It helps in building a strong portfolio by investing in various sectors of fixed income assets, making the overall performance of the investor good.


The disadvantages of fixed income assets are as follows:-

  1. Lower Potential Returns: It provides lower returns compared to other regular investment funds reducing the benefits of the investor.
  2. Reduced Returns: Fixed Income Securities provide steady but lower returns compared to other options, in case of earmark profits in the market.
  3. Depreciation: Another bigger disadvantage is the depreciation of currency. If the value of the assets rises in a few years, it may not impact on the returns of such funds, as it gives a steady & transparent returns.

Last Words

Conservative funds or fixed income securities can be beneficial for those who want to diversify their portfolio in a less risky and non-expensive way. Hence, it is a prudent investment and has greater transparency in terms of other businesses. However, it can sometimes change with the inflation or other market factors, for which investors are cautioned to make knowledgeable investment in this funds.