Fixed Interest

Description

These assets produce a known amount of income over a specific period of time.

For example, home loans; small business and commercial loans and government and commercial bonds.

How it makes a return

The main source of return is income, from interest, although they can fluctuate in value.

What affects the investment value?

Interest rates are the most important factor affecting value - when interest rates rise the value of these investments can fall because the interest received from them is fixed.

Risk and return characteristics

Risk/Return level = Moderate

The market value of fixed interest fluctuates more than cash, but the interest payments they generate are usually higher than cash. However, they also have the risk of default.