The financial markets keep on growing as time goes by. More and more assets and instruments gain popularity each time. Among these assets are fixed-income assets. And fixed-income trading is becoming more and more sought after by traders.
There are different types of fixed-income investments. And among these types, short-term fixed-income assets are quite a good deal for traders.
What are short term fixed-income investments?
When it comes to fixed-income trading, short term products return a low rate. However, the good thing is that you invest your money for only a few months at most. Such accounts have interest rates based on the fed funds rate.
Certificates of Deposits
Certificate of Deposits require you to keep your money invested for a predetermined period. Failure to comply with the requirement will lead to loss of the promised rate of return.
Money Market Accounts
Meanwhile, as for money market accounts, the bank is required to pay you marginally higher fixed rate of interest. On the other hand, you still have to do something for them, which is to maintain a minimum amount deposit. Another thing worth noting is that there is a limit to the number of transactions you can conduct within a year.
Money Market Funds
The money market funds are some type of a mutual fund that is found in the field of fixed income trading. These funds invest in different short term investments. The fixed rate payment that you will receive will be based on short term securities. Such securities are comprised of Treasury bills, Eurodollar deposits, and Federal agency notes.
Along with those, these also include repurchase agreements, certificates of deposit, corporate commercial paper. Other bases involve obligations of states, cities, or other types of municipal agencies.
If you have a savings account, you will be entitled with payments of a fixed rate of interest from the bank. These payments will rely on the Fed funds rate. In addition to that, you normally wouldn’t have any problem when it comes to adding or withdrawing whenever you want.
Short Term Bond Funds
Short term bond funds are another type of mutual funds. Such funds invest in one-year to four-year low risk bonds. The major slice of these funds is corporate bonds.
Other Types of Fixed-Income Assets
Aside from short term fixed income assets, you also have a bunch of other choices at hand.
You may want to try long term fixed-income assets like bond mutual funds, exchange-traded funds, and individual bonds. You can also try out fixed-income derivatives. Examples of fixed-income derivatives are asset-backed commercial paper, collateralized debt obligations, futures contracts, interest rate swaps, mortgage-backed securities, and options.
If those things do not sound at all appealing to you, you may check out third-party fixed income payment streams. They include fixed rate annuities, pensions, and social security.
Overall, you have a plethora of choices at your hand. Meanwhile, there are also many ways in which fixed income trading becomes more complicated that equities. Regardless, you just have to have enough knowledge and experience in the field.