Fixed Income Made Simple: Essential Terms and...

Fixed Income Made Simple: Essential Terms and Definitions

    When Should You Claim Your Social Security...
December 20, 2023

Many investors will have some exposure in their investment portfolio to bonds. Bonds can be an important component in an overall asset allocation as they typically (1) provide a reliable income stream and (2) preserve capital. While on the surface the mechanics of bond investments can seem straightforward (a loan in which the issuer agrees to pay the buyer interest for the loan), there are many terms that are used to describe the basic components of a bond that can be confusing.


By using the below illustration, we will outline and define the main terms used to describe the primary components of a bond investment. The collection of terms and definitions are the primary ones that will be seen on statements, bond offerings, trade confirmations, and heard in the news.


Yields: Many different yield numbers are referenced in fixed income. All are important and measure expected return in different ways.


There are a wealth of considerations involved in analyzing and deliberating fixed income investment strategies, and building a proper portfolio to meet an investors goals, that go far beyond the terms discussed above. Contact our experienced team to discuss your investment objectives and explore how fixed income investing aligns with your financial goals.


This information is being provided by Kayne Anderson Rudnick Investment Management, LLC (“KAR”) for illustrative purposes only and should only be used for informational purposes. The information provided here should not be considered legal or tax advice and all investors should consult their legal and/or tax professional about the specifics of their own legal and tax situation to determine any proper course of action for them. KAR does not provide legal or tax advice and nothing herein should be construed as legal or tax advice, and information presented here may not be true or applicable for all legal and income tax situations. Tax laws can and frequently do change, and KAR does not undertake to update information this should any changes occur. Information in this article is not intended by KAR to be interpreted as investment advice, a recommendation or solicitation to purchase securities, or a recommendation of a particular course of action and has not been updated since the date listed on the report, and KAR does not undertake to update the information presented. KAR makes no warranty as to the accuracy or reliability of the information contained herein.