Fixed Interest Plans

Fixed Interest Plans In a nutshell
Fixed interest bonds represent loans extended to governments or companies, promising a predetermined income, known as the “coupon,” for a specified duration. Upon the term’s conclusion, the bond issuer commits to repaying the borrowed capital.
Overview
Dependable income stream and provide liquidity.

Take comfort knowing exactly how much interest you will earn with our fixed rate saving plans.

Find assurance in knowing precisely the interest you’ll earn with our fixed-rate savings plans. Opting for our Fixed Rate Saver ensures investment security with a predetermined interest rate and clear expectations of returns.

Fixed interest bonds serve as integral elements in diversified investment portfolios due to their ability to:

  • Generate a reliable income stream and offer liquidity.
  • Provide a level of capital security, as these securities denote loans to governments or companies guaranteed to repay the initial capital at the term’s end.
  • Balance portfolio risk, given their lower risk profile compared to equities or commodities.
  • Offer stability and predictability in income returns, with fixed coupon payments disbursed regularly.
  • Enable investment across various sectors and geographies, facilitating risk management through diversification.
 

Types of Plans

Various types of fixed interest plans include:

  • Government bonds: Issued by governments to finance operations and settle debts, they are deemed low-risk investments backed by the government, albeit with lower returns.
  • Corporate bonds: Issued by companies to raise capital, they pose higher risk but offer potentially higher returns than government bonds.
  • High yield bonds: Also termed junk bonds, these are issued by companies with low credit ratings, offering elevated returns but carrying higher default risk.
  • Fixed rate savings accounts: Savings accounts offering fixed interest rates over specified periods, considered low-risk investments.
  • Money market funds: Mutual funds investing in short-term, low-risk fixed interest securities like Treasury bills and commercial paper, providing safety alongside relatively low returns.

 

Risks Involved

Fixed interest plans entail certain risks, including:

Interest rate risk: Rising interest rates can diminish the value of fixed interest investments as investors seek higher-yielding alternatives.

Credit risk: Possibility of bond issuers defaulting on payments, resulting in losses for bondholders.

Inflation risk: Inflation can erode the real value of fixed interest investments over time, reducing purchasing power.

Liquidity risk: Fixed interest investments may be less liquid, complicating rapid sale if necessary.

Currency risk: Fluctuations in exchange rates can impact the value of fixed interest investments issued in foreign currencies.