What is a fixed income fund?

As an asset class, fixed income securities encompass different types of securities, the best known being bonds. In the marketplace, the terms “fixed income securities” and “bonds” are generally used interchangeably. The fixed income category also includes mortgage-backed securities, asset-backed securities, and convertible debt securities.

For many investors, investing in a fixed income fund is more efficient than buying fixed income securities individually. Fixed income mutual funds work like equity mutual funds: money from several investors is pooled and this money is invested by a professional, according to what he considers to be the most advantageous investments. . Some fixed income funds seek to replicate the performance of the general market and invest in short and long term fixed income securities of various issuers, such as the Government of Canada, government agencies and corporations, as well as other titles, more specialized. Some fixed-income funds, such as short-term or high-yield funds,

Whether its mandate is general or more targeted, a fixed income fund generally invests in numerous and diverse transferable securities (buying and selling frequently, according to market conditions and rarely holding the securities until their maturity); it is therefore a simple way to obtain good diversification, even if the amount invested is modest. Income is generally paid out once a month and reflects the set of fixed income securities that make up the fund, as well as the payment schedule for each. Therefore, the distribution may vary from month to month.

Advantages of Fixed Income Funds

Diversification

Since the securities that make up fixed income funds generally have varying maturities, if an issuer fails to pay interest or repay principal, the impact of that security’s performance will be mitigated. Some types of fixed income funds, such as those focused on the general market, are also diversified by fixed income class and invest in securities of corporations, governments and government agencies, and asset-backed securities mortgages. For most fixed income funds, the minimum investment is modest enough to give you much greater diversification for a much lower amount than if you bought the securities individually. Are you planning to take the CPA Exam soon? Make sure to take the best CPA Exam Review to fully prepare you in passing the CPA Exam.