Advantages and Disadvantages of Fixed-

Income Securities

Advantages

 Fixed-income securities provide steady interest income to investors throughout the life of the
bond

 Fixed-income securities are rated by credit rating agencies

 Fixed-income securities usually have less price volatility risk

 Fixed-income securities such as U.S. Treasuries are guaranteed by the government

Disadvantages

 The issuer can default on making the interest payments or paying back the principal

 Fixed-income securities typically pay a lower rate of return than other investments

 Inflation risk can be an issue if prices rise by a faster rate than the interest rate on the fixed-
income security

 Market interest rates may rise higher than the rate on a fixed-income security