Fixed Income

Understanding Income, Stability and Risk.

Fixed-income investments are financial instruments that generally involve contractual interest payments, repayment obligations or other defined cash-flow arrangements.

They can play an important role in financial portfolios, particularly where investors seek to manage liquidity, income requirements and exposure to different asset classes.

However, fixed-income investments are not automatically risk-free.

Understanding Fixed-Income Products

Government Securities

Government securities are debt instruments issued by the Central Government or State Governments.

Their market values may fluctuate with interest rates, and investors should understand the terms of each instrument.

Corporate Bonds

Corporate bonds represent borrowings by companies and may provide periodic interest payments or other specified cash flows.

Their risk depends on the issuer's financial strength, credit quality, contractual terms and market conditions.

Non-Convertible Debentures (NCDs)

NCDs are debt instruments that cannot be converted into equity shares. They may offer specified coupon and maturity structures, subject to issuer and instrument risks.

Fixed Deposits

Bank and eligible corporate fixed deposits may offer predetermined interest arrangements, subject to their respective terms and applicable protections.

Bank deposits and corporate deposits have different risk characteristics.

Debt Mutual Funds

Debt mutual funds invest in portfolios of fixed-income and money market securities.

Unlike a fixed-rate deposit, the returns of a debt mutual fund are not guaranteed.

Target-Maturity Strategies

Certain debt investment products follow a defined maturity-oriented approach, but their market value, credit exposure and realised outcomes may still vary.

Important Risks

Credit Risk: The possibility that an issuer fails to meet its financial obligations.

Interest-Rate Risk: Changes in market interest rates may affect the value of existing debt securities.

Liquidity Risk: Some securities may be difficult to sell before maturity.

Reinvestment Risk: Future cash flows may need to be reinvested at different interest rates.

Inflation Risk: Investment income may not preserve purchasing power.

Next Portfolio's Perspective

We believe fixed-income investments should be evaluated through their credit quality, maturity profile, liquidity, taxation, costs and role within an investor's overall portfolio.

Investors should distinguish between contractual yields, indicative yields and guaranteed payments.

Income Expectations Should Always Be Considered Alongside Risk.

Product availability and transaction facilitation are subject to the relevant distribution authorisations and arrangements.