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Simple English definitions for legal terms
fixed-income security
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A quick definition of fixed-income security:
A fixed-income security is a type of investment that provides a fixed amount of income to the investor. This can be in the form of interest payments or regular payments of a set amount. Examples of fixed-income securities include bonds, certificates of deposit, and preferred stocks. These investments are generally considered less risky than stocks, but may offer lower returns.
A more thorough explanation:
A fixed-income security is a type of investment that provides a fixed amount of income to the investor. It is a type of security that represents a loan made by an investor to a borrower, such as a company or government. The borrower agrees to pay back the loan with interest over a set period of time.
Examples of fixed-income securities include:
- Bonds
- Treasury bills
- Certificates of deposit
- Corporate bonds
For example, if you buy a bond from a company, you are essentially loaning money to that company. The company agrees to pay you back the amount you loaned, plus interest, over a set period of time. This interest rate is fixed, meaning it does not change over the life of the bond.
Fixed-income securities are considered less risky than other types of investments, such as stocks, because they provide a fixed rate of return. However, they may also provide a lower rate of return than other investments.