An investment paying a fixed interest rate or dividend at regular intervals.
A fixed-income security is an investment that pays a fixed amount of interest or dividends at regular intervals until maturity, when the principal is returned. Bonds are the most common fixed-income securities, but the category also includes preferred stocks, money market instruments, and CDs. Fixed-income securities provide predictable income and are generally less volatile than stocks, making them appropriate for conservative investors or those nearing retirement. However, fixed-income securities have interest-rate risk: when rates rise, existing bond prices fall because new bonds offer higher yields. The relationship between risk and yield is key: higher-yielding fixed-income securities carry more risk (credit risk, default risk) than lower-yielding ones.