What is meant by Fixed Income?

Fixed income refers to types of investments that provide returns in the form of regular, fixed payments and the eventual return of principal at maturity. This is most commonly associated with bonds or similar instruments, where the issuer pays a predetermined interest rate at set intervals (usually monthly, semi-annually, or annually) until the maturity date, when the principal is repaid.

The nature of fixed income investments allows investors to predict their cash flows, which provides a sense of stability and predictability compared to variable investments that may fluctuate significantly based on market conditions. This characteristic makes fixed income an attractive option for conservative investors, such as retirees or those seeking steady income without the risks associated with equity investments.

In the context of the other options, income that fluctuates based on market performance refers to equities or variable income streams. Income generated solely from salary does not encompass the concept of fixed income, which pertains specifically to investment returns. Lastly, while many fixed income products can generate taxable income, not all fixed income income is fully taxable, as some may have tax-exempt status (like municipal bonds), making that option irrelevant.