Fixed Income Investors
Tools for Conservative Investors
We’re well aware that not all of our clients are interested in pursuing high growth stocks either due to personal preference for limiting risk or a life situation that calls for more stable income. For these clients, our firm has several great alternatives to riskier stocks that can both provide more security and still grow at moderate rates.
Government bonds can be thought of as loans made by an investor to the government for varying lengths of time, but usually less than a year. These bonds typically provide a relatively low rate of return but the benefit is that the bonds are backed by the United States treasury, making the risk of losing money extremely low.
Therefore, these bonds are great for short term investments of cash that may be needed in the near future for things such as retirement or a down payment on a house. Using these bonds is also a great way to combat inflation which would eat away at money kept in a savings account.
These bonds are issued by businesses of every size and industry. They use this money to fund new projects and then pay bond holders for the use of their money. Corporate bonds generally have the highest returns with the smaller, more unstable companies paying the most and the biggest companies paying the lowest returns since they are less risky investments.
This investment type is a great risk diversification option and can often help to offset losses taken in the stock market. Our firm pays special attention to the credibility of the companies issuing bonds in order to maintain your financial security while also maximizing gains.
Bond funds, much like mutual funds for stocks, are a group of bonds that can be bought as a single issue and are effective ways of diversifying risk. Bond funds often include a focus on a certain type of bond such as a specific group of corporate or municipal bonds. These funds can be a much more efficient way of investing in bonds instead of buying individual bonds on their own.
Municipal bonds are similar to corporate bonds in that they are essentially loans an investor makes with the goal of a moderate rate of return after the bond matures or when the investor chooses to sell. The difference for municipal bonds is that they are issued typically by State or local government which makes them income tax exempt. This tax exemption means municipal bonds are an especially good option for our clients in very high tax brackets.