Fixed Income & Bonds
Fixed income investments generally pay a return on a fixed schedule, though the amount of the payments can vary. Individual bonds may be the best known type of fixed income security, but the category also includes bond funds, ETFs, CDs, and money market funds.
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Bonds make interest payments and repay the principal on a fixed schedule. Interest and principal payments are subject to the creditworthiness of the issuer.
Bond mutual funds invest primarily in individual bonds. Many make periodic dividend payments based on the interest paid by the bonds held in the fund.
Fixed Income ETFs
Exchange-traded funds (ETFs) are baskets of investments that trade as a single unit throughout the day.
Certificates of Deposit (CDs)
CDs offer FDIC insurance,3 providing a guarantee of the invested principal up to certain limits.
Money Market Funds
Money market funds are managed to help preserve your principal by investing in lower-risk debt securities with shorter maturities.
Deferred Fixed Annuities4
Deferred fixed annuities offer a guaranteed5 rate of return over a set time period, with tax deferral.
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Minimum mark-up or mark-down of $19.95 applies if traded with a Fidelity representative. For U.S. Treasury purchases traded with a Fidelity representative, a flat charge of $19.95 per trade applies. A $250 maximum applies to all trades, reduced to a $50 maximum for bonds maturing in one year or less. Fixed income trading requires a Fidelity brokerage account with a minimum opening balance of $2,500. Rates are for U.S. dollar–denominated bonds; additional fees and minimums apply for non-dollar bond trades. Other conditions may apply; see Fidelity.com/commissions for details. Please note that mark-ups and mark-downs may affect the total cost of the transaction and the total, or "effective," yield of your investment. The offering broker, which may be our affiliate, National Financial Services LLC, may separately mark-up or mark-down the price of the security and may realize a trading profit or loss on the transaction.
2. Fidelity commissioned Corporate Insight to study bond pricing, available online, for self-directed retail investors from five brokers that offer corporate and municipal bonds. The study compared online bond prices for over 20,000 municipal and corporate inventory matches between September 2nd and October 6th, 2015. It compared municipal and corporate inventories offered online in quantities of at least $10,000 face or par value. The study found on average that three competitors that bundled their markups or fees into their online bond prices were asking an average of $13.97 more per bond. Corporate Insight determined the average cost differential by calculating the difference between the costs of matching corporate and municipal bond inventory at Fidelity vs. these markup-based firms in the study, then averaging the differences across all of the competitor firms. Hypothetical cost savings of $286 is based on an average size order of $22,000 face or par value bonds and average cost differential of $13 per bond.
Each individual's situation is unique and therefore seeking additional guidance from a tax advisor is suggested. Although deferred fixed annuities offer tax-deferral, if you are considering one to fund a qualified retirement plan or IRA, you should do so for the annuity's features and benefits other than tax deferral. In such cases, tax deferral is not an additional benefit of the deferred fixed annuity.
You could lose money by investing in a money market fund. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before investing, always read a money market fund’s prospectus for policies specific to that fund.
High-yield/non-investment-grade bonds involve greater price volatility and risk of default than investment-grade bonds.