Five Reasons to Be Active in Fixed Income (2024)

FAQs

Five Reasons to Be Active in Fixed Income? ›

Fixed income markets are primed to reward active management

Bonds also demonstrate an asymmetric risk profile in which they may fall in value much more than they increase. Active portfolio managers have several advantages over passive fixed income strategies, including more flexibility on timing and volume of trading.

Fixed income markets are primed to reward active management

Bonds also demonstrate an asymmetric risk profile in which they may fall in value much more than they increase. Active portfolio managers have several advantages over passive fixed income strategies, including more flexibility on timing and volume of trading.

Fixed income investments are designed to generate a specific level of interest income, while also providing diversification, capital preservation, and potential tax exemptions.

Fixed income serves four key roles in a portfolio: Diversification from equities, capital preservation, income and inflation protection.

So with that in mind, what is the portfolio allocation that investors should be considering with regard to some of the fixed income exposure that they have versus equities. So versus equities, you know, fixed income is now offering attractive risk adjusted returns, you can get an all in yield of between five and 6%.

What does living on a fixed income mean, exactly? Living on a fixed income generally applies to older adults who are no longer working and collecting a regular paycheck. Instead, they depend mostly or entirely on fixed payments from sources such as Social Security, pensions, and/or retirement savings.

The steady and stable interest payments from fixed-income products can partly offset losses from the decline in stock prices. As a result, these safe investments help to diversify the risk of an investment portfolio.

Key Takeaways

All equity markets, no matter the type, can be volatile and experience significant price highs and lows. Due to the lower risks and rewards, strategies are often far less varied in fixed-income markets than equity markets.

When answering this question, focus on specific aspects of the job that appeal to you. Show enthusiasm and knowledge about the company and its values. Explain how the job aligns with your skills, career goals, and personal interests.

Most importantly, a fixed income job is one of the most reliable and secure careers in the financial world as it entails less risk and offers a diverse range of investment options for all.

What impact fixed income? ›

The main factors that impact the prices of fixed-income securities include interest rate changes, default or credit risk, and secondary market liquidity risk.

Reducing your cost of living can be one of the most strategic money moves when you're on a fixed income. This might look like staying in your area but moving to a home with a lower cost to maintain, like trading in the big house with high utility bills or property taxes for a more affordable, lower-maintenance home.

The “4 Cs” of credit—capacity, collateral, covenants, and character—provide a useful framework for evaluating credit risk. Credit analysis focuses on an issuer's ability to generate cash flow.

Risk Management

Fixed income securities can also be an important tool for managing risk in an investment portfolio, and can be used as defensive assets to protect your investment portfolio against market volatility and inflation.

The Core Fixed Income Strategy is a value-oriented fixed income strategy that invests primarily in a diversified mix of U.S. dollar-denominated investment-grade fixed income securities, particularly U.S. government, corporate, and securitized assets, including commercial mortgage-backed securities, residential mortgage ...

Fixed-income investing is generally a conservative strategy where returns are generated from low-risk securities that pay predictable interest. Since the risk is lower, the interest coupon payments are also, usually, lower as well.

Passive strategies seek to replicate the performance of a market index while keeping fees to a minimum. Active strategies, in contrast, strive to outperform the market, net of fees, by relying on managers' research and analytical skills to buy and sell individual securities.

Active funds

Mutual funds following an active investment strategy aim to outperform their benchmark indices by selecting undervalued stocks or capitalising on market trends. This strategy appeals to investors who seek higher returns and are willing to navigate higher risks.