Investing Unit 5: Five Tips for Fixed-Income Investors

• Introduction
• Unit 1: Basic Building Blocks of Successful Financial Management
• Unit 2: Investing Basics
• Unit 3: Finding Money to Invest
• Unit 4: Ownership Investments
• Unit 5: Fixed-Income Investing

• Certificates of Deposit
• Series EE and I U.S. Savings Bonds
• Money Market Mutual Funds
• Bonds
• Unit Investment Trusts
• Bond Mutual Funds
• Mortgage-Backed Securities
• Annuities
• Preferred Stock
• Guaranteed Investment Contracts
• Five Tips for Fixed-Income Investors
• Summary
• Action Steps
• About the Author

• Unit 6: Mutual Fund Investing
• Unit 7: Tax-Deferred Investments
• Unit 8: Investing Small Dollar Amounts
• Unit 9: Getting Help: Investing Resources
• Unit 10: Selecting Financial Professionals
• Unit 11: Investment Fraud

• Study Guide
• Action Steps
• Monthly Investment Messages
• Glossary

1. Know the risks. All investments have risks, including fixed-income securities. To earn a higher return, for example, an investor may need to consider bonds from a less creditworthy issuer.

2. Beware of guarantees. Even with a portfolio of Treasury securities, an investor can lose money via interest rate risk. Beware of promises that “you can never lose principal.” You can.

3. Ladder your portfolio. Stagger the purchase of bonds, CDs, and Treasury securities to spread out the tax owed and expose only a portion of your portfolio to interest rate changes at any one time.

4. Use bonds to hedge stock investments. Have your cake and eat it too. Buy a zero-coupon bond to guarantee the return of principal and use the balance of principal to invest in ownership assets (e.g., stock).

5. Match investments with financial goals. Invest with a goal in mind. For example, use a 2-year Treasury note for an upcoming car purchase or an 8-year zero-coupon bond for a child’s education.