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Fixed-income investments for a safer nest egg

Bonds, managed funds, CDs and REITs are one way to invest to earn a fixed income.

Fixed-income investments are a lower-risk way to save and grow your money. But lower risks can mean slower growth.

What are fixed-income investments?

Fixed-income investments, also known as fixed-interest, can offer consistent returns over a set time period. This type of investment is designed to avoid high stock market risk and preserve your money.

On the downside, the returns won’t be as high as investing in high-growth stocks and ETFs.

Common fixed-income assets include:

  • Bonds
  • Government or corporate bonds
  • Certificates of deposit (CD)
  • Mutual funds and ETFs
  • Real estate investment trusts (REITs)

Bonds

The most popular kind of fixed-interest investments are bonds. A bond is basically a loan to a business or the government. In return, the organization promises to pay you back on a specific date with interest at a fixed rate.

  • Where to buy them: Through some brokerage accounts or directly from the US Treasury.
  • Pros: Fixed interest rate payments, plus principal when the loan is fully repaid. It often comes with higher yields than savings accounts, and it is relatively low-risk.
  • Cons: Depending on the bond, it could have low liquidity, meaning you won’t be able to sell it whenever you want.

Certificate of deposit (CDs)

A certificate of deposit is an investment product banks or credit unions offer. You deposit a specific amount in the bank for a set time frame and earn interest on your deposit.

  • Where to find them: Banks, credit unions or brokerage accounts.
  • Pros: Guaranteed returns and FDIC-insured up to $250,000 per person or more.
  • Cons: You’ll likely pay a fee if you withdraw your funds before the agreement expires.

Fixed-income funds

Today, many mutual funds and exchange-traded funds (ETFs) offer fixed-income investments. The way this works is the fund invests in bonds or debts. As an investor in these funds, you get to earn fixed income on your invested money.

  • Where to find them: Brokerage accounts or mutual fund issuers.
  • Pros: Many investment options, including high-risk/high-reward junk bonds.
  • Cons: There’s often an annual fee. Depending on the funds you invest in, there could be a higher risk too.

Real estate investment trusts (REITs)

REITs are companies that own, operate or finance real estate. These companies create trusts in which others can invest. Most REITs rent their real estate, and the income is distributed as a percentage to investors.

  • Where to find them: Through a brokerage account or directly with the REIT.
  • Pros: Access to real estate investing. Also, investing in REITs typically comes with higher interest than investing in CDs.
  • Cons: It takes years to make your investment worthwhile. Also, there are often fees if you want to withdraw your funds in fewer than five years.

How to invest in fixed-income investments

This largely depends on what you want to invest in. Most popular brokers offer access to bonds directly, as well as indirectly through bond ETFs. Also, some REITs are traded on the stock market and you can buy them the way you’d buy any other stock.

Compare platforms to invest in fixed-income instruments

If you don’t have an account with a trading platform yet, consider one that doesn’t charge commissions on stocks and ETFs.

Name Product Asset types Option trade fee Annual fee Signup bonus
J.P. Morgan Self-Directed Investing
Stocks, Bonds, Options, Mutual funds, ETFs
$0 + $0.65/contract
0%
N/A
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Worthy
Bonds
$0
0%
N/A
Earn a 5% fixed return on bonds that support American small businesses.
TradeStation
Stocks, Bonds, Options, Mutual funds, ETFs, Cryptocurrency
$0 + $0.50/contract
$0 per month
$50
Deposit qualifying assets of $5,000+
A platform built for all kinds of traders and all styles of trading
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Compare up to 4 providers

Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.

Bottom line

If you’re looking for a low-risk way to invest, choosing an option with a fixed interest rate may be for you. But if you’re looking for a balanced portfolio with both high- and low-risk investments, compare other investment options to learn more about which combination best suits you.

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