How to Start Investing in Fixed Income Instruments

Let’s say you have a lump sum of money – say from an inheritance –  and you are not sure what to do with it, an excellent idea is to invest it in a fixed income security instrument. 

Investing in Fixed Income Instruments is a decent, risk-free manner of saving extra funds for plans. It is also advised for people who don’t like taking the huge risks of investing in trending opportunities. This set of people would also find fixed-income instruments safe to earn interest on their capital.

There are several advantages to investing in fixed income instruments. But before those, let’s look into the most common types of fixed income instruments.

  1. Government and Corporate bonds

There is really no difference between these two security types, except that Government bonds are issued by the government, while companies issue corporate bonds. They both serve to raise money to fund projects and immediate expenditure.

Once you signify interest in purchasing a company’s bonds, you are issued documents stating the terms involved. These terms include the interest rates and the proposed maturity period. According to the interest rate, you receive coupon payments semi annually (i.e every 6 months until maturity date). At the maturity period, your capital which is also called a face value is paid back to you.

  1. Nigerian Government Treasury bills

Treasury bills are a form of security that mature within a year. They are usually backed by the Federal government of Nigeria. Treasury bills are discounted instruments which means the considerations paid is less than the amount you will receive at maturity. At the maturity period, your capital which is also called a face value is paid back to you.

  1. Federal Government of Nigeria savings bonds

The Federal government of Nigeria established the savings bonds to help promote savings culture among Nigerians, while encouraging retail investors to profit from the risk-free scheme. The bonds are issued in multiples of 1000 Naira, with a minimum deposit of 5000. You can invest up to 50 million naira in the bonds. The interest is paid quarterly, over a maturity period of 2 to 3 years. This type of fixed income instrument is targeted to the retail sector of the economy.

A major benefit of acquiring fixed income instruments is that you have a guaranteed source of income, expected after a known timeline. This aids your financial planning, especially for the future. On the part of the loaner, they get a source of income to satisfy their company’s immediate needs. In the end, it’s a win-win situation.

Fixed income instruments like the Treasury bills are backed by the full faith of the Federal government, which means risk profile for these instruments is/are low.

In conclusion, settling for a fixed income instrument plan is viable one kind of investment that gives you a guaranteed rate of return as the maturity amount is known at the point of investing.

We Can Help 

Cordros Capital is happy to help you get started with your fixed income investing journey, starting with our Cordros Fixed Income Fund. We are a leading financial services group, offering fund management services, amongst many others. 

At Cordros, your fixed income fund would be invested in Federal Government bonds, Sub-national bonds, corporate bonds and high-quality money market instruments such as Treasury Bills, Commercial Papers, Bankers Acceptances and Certificate of Deposits with rated banks in Nigeria. But there’s more

Start your investing journey today and give us a call on 07002673767 or email at [email protected]

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