Identification

• Certificate of deposit and bonds are examples of fixed income, or debt securities. Debt securities identify loans that are repaid, with interest. You are essentially loaning the bank or a corporation money, and they pay you interest on a regular basis. You will earn a greater interest with a riskier investment, a BB bond as opposed to an AAA bond, but the risk of default is greater too.
  
  

Features

• Investors diversify to earn adequate across various economic sectors. Industry, geography, maturity dates and class of securities are categories by which you should diversify fixed income. Credit rating agencies, such as Standard and Poor's and Moody's, apply ratings that classify fixed income according to risk. Riskier assets pay higher returns.
  
  

Considerations

• Fixed income securities may be traded for profits. Distressed bonds can sometimes be bought cheaply and sold for large gains---amidst improving economic conditions. These are not for the faint of heart or for those who cannot afford to lose money.
  
  

Misconceptions

• No perfect fixed income strategy exists for all investors. Retirees prefer to purchase U.S. Treasuries and AAA corporate bonds for their safety. Younger savers, however, may be better served with broad-based and international bond funds that pay higher rates, but carry more risks.
  
  

Balance

• You might want to balance your fixed income portfolio between bond funds that issue monthly dividends and dividend-paying stocks that have payouts on a quarterly basis. Blue Chip, dividend-paying companies can be a great asset to your portfolio if the share price goes up and if the company raises its dividend on an annual basis as many companies do.