🛡️ Meaning
Income security is about the level of income (absolute and relative to needs), assurance of receipt, expectation of income adequacy now and improvement or deterioration in the future, both during a person? s working life and in old age or disability retirement.
🛡️ Types of Income security
◉Treasury Bills:
Treasury bills are the safest form of fixed income securities in the world. In reality, treasury bills refer to the debt securities which are issued by the United States government. However, the term is often used to refer to any kind of debt which has been issued by a government. Since governments have control over the money supply of any country, lending to them comes with very little risk. This is the reason why many risk-averse investors park their funds in this asset class.
◉ Bank Fixed Deposits :
Bank fixed deposits are the next safest category of fixed income securities. Just like treasury bills, the maturity value of the investments is known well in advance to the investors. This is the reason that these investment vehicles are preferred by risk-averse investors. Also, the safety of bank fixed deposits is guaranteed by these big banks.
◉ Corporate Bonds:
The next category of bonds is corporate bonds. In terms of creditworthiness, corporate bonds rank lower on the ladder as compared to treasury bills and bank fixed deposits. However, the market for corporate bonds is huge. This is because all types of corporations are trying to raise money from the marketplace. This is the reason that investors face a huge choice in this segment. They can choose to lend to top-tier blue-chip companies wherein the chance of default is almost negligible. On the other hand, investors could also choose to invest in companies that do not have strong financials.
◉ Money Market Instruments :
Money market instruments are also used by corporations. However, unlike bonds, these instruments are not long-term in nature. Money market instruments are basically used by companies in order to manage their working capital requirements. However, like other fixed income securities, they too bear a fixed rate of return.
◉ Asset-Backed Securities :
The next category of fixed income securities is called asset-backed securities. These are the wild west of the fixed-income securities market. Over the years, investment bankers have used structured finance to conjure up several different types of securities. Some of these securities are backed by mortgages, others by car loans, and yet others by credit card debt. Asset-backed securities are extremely risky. This fact has already been demonstrated in the subprime mortgage crisis.
◉ Annuities :
Annuities are different types of fixed-income securities. Normally, fixed income securities return the principal at the end of the tenure. However, when it comes to annuities, the principal is never returned. Instead, it is the exchange of a lump sum for a stream of periodic payments. However, since annuities also provide a fixed rate of return, they can be considered to be fixed-income security as well.
🛡️ Benefits of Income security :
Income security is important for both society and the economy. If people have secure incomes it helps to prevent them from falling or remaining in poverty. They are also less likely to be subject to inequality. In addition secure incomes facilitate people to contribute to the economy.
🛡️ Fixed Income Risk :
Fixed income risks occur due to the unpredictability of the market. Risks can impact the market value and cash flows from the security. The major risks include interest rate, reinvestment, call/prepayment, credit, inflation, liquidity, exchange rate, volatility, political, event, and sector risks. In other words Fixed income is secured only your certain days it is depend on Active income.
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