Fixed income risks

Fixed income is a type of investment that offers periodic and pre-established returns to the investor, with lower risk than other alternatives such as variable income. 

Fixed income is made up of financial assets that represent a debt that the issuer (it can be a State, a company or a financial entity) has with the investor, and which it undertakes to repay within a certain period and with certain interests .

Return with lower risk: fixed income

Fixed income risks

Fixed income can be an interesting option for those investors looking to obtain a return with less risk, since it offers greater security and stability than variable income, which depends on market fluctuations and can generate losses. 

However, fixed income is not free of risks, such as credit risk (that the issuer cannot meet its obligations), market risk (that the price of the asset varies due to changes in interest rates or inflation) or liquidity risk (that there is not enough demand to sell the asset).

Aspects to consider

To invest in fixed income, it is important to take into account some aspects such as the term (how long you want to maintain the investment), the interest rate (fixed or variable), the currency (if the asset is denominated in a currency other than the of the investor) or the credit quality (the solvency of the issuer). Furthermore, it is advisable to diversify your fixed income portfolio, investing in different issuers, terms and currencies, to reduce overall risk and increase the chances of obtaining a good return.

Complement and shelter

Fixed income can be a useful tool to complement other riskier investments, such as equities, and to balance the investor's risk-return profile. Fixed income can provide regular and predictable income, which can be used to cover recurring expenses or to reinvest in other assets. 

In addition, fixed income can act as a refuge in times of uncertainty or volatility in the markets, since it usually has a lower correlation with equities and can cushion falls.

Conclusion

Fixed income is an investment option that offers a return with less risk than other alternatives, but it also involves some risks that must be known and managed. 

Fixed income may be suitable for conservative or moderate investors, who seek to preserve their capital and obtain a stable income, or for more aggressive investors, who want to diversify their portfolio and reduce their exposure to risk. Fixed income can be adapted to the needs and objectives of each investor, as long as the term, interest rate, currency and credit quality of the asset are taken into account.