Traditionally, the term “fixed-income assets” channels images of elders, such as our grandparents, talking about the bond market. However, fixed-income assets, like bonds and certificates of deposit (CDs), offer a wealth (pun intended) of opportunity for younger investors as well.
First and foremost, any broker or financial advisor will tell you the importance of portfolio diversification. The old adage, “don’t put all your eggs in one basket,” rings particularly true with today’s economic crisis; you may be hard-pressed to find someone who disagrees. Thus, fixed-income assets should hold a spot in any diverse investment portfolio as a possible safe-haven for some of your money, regardless of your tolerance for other higher-risk, yet higher-reward options.
Second, fixed-income assets can serve as a supplement to your income. For example, a conservative bond ladder can put consistent and dependable cash in an investor’s pocket regularly over the life of the holdings. In tremulous times like these, structuring your securities like this may be a welcome alternative.
Of course, fixed-income assets do have their limitations. There is generally a much smaller reward with these options than with say, stocks. Younger generations are typically better positioned to take the bigger risks as they have the time and (usually) the financial stability to explore investment options in various markets. That said, historically more secure fixed income products, like the FDIC-insured CDs and agency bonds available at Zions Direct, are typically a wiser option for saving for foreseeable events, such as home buying, weddings and college tuition. These life milestones aren’t exactly the experiences on which we should gamble our money.
These trying times have shown that everyone, regardless of their age, can benefit from investments that generally offer less risk and a better chance of reward. Most would do well to take the wisdom of our elders and invest in fixed-income assets sooner rather than later.
Darhl Peterson has traded in the US Treasury, retail bond, and telecom business sectors for the last ten years. Currently Peterson is a Bond Trading Manager for Zions Direct.