One of the safest investments one can make in trying to generate income from his or her capital, is through Fixed Income instruments. Unlike risky investment strategies, a sound-minded fixed income investor approaches the market with the intend of preserving capital and generating income. With that objective in mind, they should stay away from investing in stocks as these other types of investments, while they might appreciate your money a lot more, they can be very volatile and risky. Instead, they put their money in money market funds, CDs, government, municipal and/or corporate bonds.
A CD (certificate of despot) is a special saving account you open at a bank institution and unlike a regular saving account, a CD account usually gives you a higher interest rate; however, the funds will be locked for a specific amount of time. In essence when buying a CD, one is lending its money to the bank who promises to repay you back at maturity with interests. This type of instrument, up to a certain amount, carries insurance from FDIC.
A Bond is also a loan you give out, and for the most part, it can be to either the Government if you buy Treasury Bonds, to public or private corporations if you buy Corporate Bonds or even to cities and counties if you buy Municipal Bonds. Among those, treasury bonds are the safest as they are guaranteed by the Government; next in line would be the municipals and lastly the corporate. The amount of interest you will receive depends on a few important factors, but the main once are the type of Bond, the maturity, and its rating.
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