Fixed income describes investments that provide specified or contractually determined payments over time. Payments may be fixed or variable, as with floating-rate bonds or staking rewards, so passive income is the broader category. section 5.0
Common fixed-income examples include:
- Bonds: lend money to a government, municipality, or corporation, receive interest, and recover principal at maturity. section 5.5
- U.S. Treasury bills mature in under one year, notes in one to ten years, and bonds in over ten years. section 5.5
- Riskier bonds generally offer higher yields, while central-bank interest rates significantly affect bond values. section 5.5
Income planning
A portfolio earning 5% annually may appear to cover yearly expenses, but inflation, spending changes, and market risk can undermine that plan. Growth assets may earn more over time yet force losses when sold during a bear market. section 5.4
